Sears Holdings Corporation (SHLD), after suffering a decline in earnings of just 0.5% in the fourth quarter of fiscal 2010, expects to incur a loss in the first quarter of fiscal 2011. The company expects net loss in the range of $145 million to $195 million, which entails loss per share of $1.35 to $1.81. The company had earned 14 cents a share in the prior-year period.

The company estimates adjusted EBITDA of $25 million to $105 million in the first quarter of fiscal 2011.

Comparable-Store Sales Update

The company, owning Sears and Kmart stores, declared first quarter of fiscal 2011 comparable-store sales decline of 3.6%. Kmart clocked a 1.6% fall in comparable-store sales while Sears Domestic registered a decline of 5.2%.

The fall in comparable-store sales was primarily attributable to weak performance in appliances, apparel and consumer electronics. However, Sears home, sporting goods, jewelry and footwear categories had a slightly ameliorative impact on total comparable-store sales.

Also, in the first quarter of fiscal 2011, the company commenced the inclusion of Internet sales from and shipped direct to customers in comparable-store sales figures. The inclusion helped to mitigate the decline in total domestic comparable-store sales to the extent of 50 basis points. The quarter experienced a growth of 22.4% in sales from and shipped directly to customers.

The company expects comparable-store sales to fall 9.2% at Sears Canada in the recently concluded quarter.

Financial Position

The company expects to end the quarter with merchandise inventories of $9.8 billion. During the first quarter, the company has bought back approximately $101 million worth of shares at an average price of $81.61 per share. As of April 30, 2011, the company is left with $86 million of common shares, to be repurchased, as per the authorization.

Sears also made an announcement that its board of directors has approved the repurchase of up to an additional $500 million of the company’s common shares.

Sears, whose portfolio of brands include Diehard, Craftsmen and Kenmore, faces stiff competition from rivals like Target Corp. (TGT) and Wal-Mart Stores Inc. (WMT).

Sears’ shares maintain a Zacks #3 Rank, which translates into a short-term Hold recommendation. Our long-term recommendation on the stock remains Neutral.

SEARS HLDG CP (SHLD): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
Zacks Investment Research