Bad News For Sears, Good News for Boeing

Sears Holdings Corp.’s third-quarter loss took a steeper dive, dragged down by weakness in Canada, declining consumer electronics sales and softer clothing sales at its Kmart stores. Its results missed Wall Street expectations, and Sears shares fell $2.87, or 4.2 percent, to $65.43 in premarket trading.  At time of this writing they were at $65.19, down 3.11 or -4.55%.
The parent company of Sears and Kmart stores (NASDAQ:SHLD) stated today that it lost $421 million, or $3.95 per share, for the period that ended Oct. 29. This time the previous year it lost $218 million, or $1.98 per share. Removing a pension expense and other items, Sears lost $2.57 per share, while  analysts had expected a smaller loss of $2.29 per share. The company’s total debt was $4.6 billion as of Oct. 29 compared with $4 billion as of Oct. 30, 2010.
The retailer stated that it was not satisfied with its performance but noted some bright spots, such as improving sales of clothing at its Sears stores and an increase of almost 20 percent in its domestic online business.
Both Sears and Kmart saw gross margin rates drop, with Kmart hurt by more markdowns for clothing and home goods and Sears impacted by reduced margins in its home appliance and consumer electronics categories.Quarterly revenue slipped 1 percent to $9.57 billion from $9.68 billion, missing Wall Street’s estimate of $9.63 billion. CEO Lou D’Ambrosio attributed the revenue decline in part to fewer Sears and Kmart stores being in operation.
Sears Holdings has more than 4,000 stores in the U.S. and Canada, with different problems presenting at each brand. SHC said revenue at its Sears stores open at least a year dipped 0.7 percent and fell 0.9 percent at its Kmart stores. Sears stores were adversely affected by fewer sales of appliances and consumer electronics, while Kmart stores were hindered by consumers filling more prescriptions with generic drugs as well as a drop off sales of clothing and home goods. The figure fell 7.8 percent for Sears Canada.This metric is a key indicator of a retailer’s health because it excludes results from stores recently opened or closed.

A different iconic American company had some good news to report: Boeing (NYSE:BA) won a record 21.7 billion airplane order. The sale of 230 short-haul 737 jets, worth $21.7 billion, is the largest commercial order in Boeing’s history, toppling a previous record set just days ago. In that order, Boeing landed an $18 billion order for 50 wide-body 777 jets from Emirates airline at the Dubai Air Show..
Today’s deal is larger still, including options for another 150 aircraft valued at $14 billion, bringing its potential total value to $35 billion. Boeing said the Lion Air order, when finalized, would be its largest ever “by both dollar volume and total number of airplanes.”
The order is a boost for Boeing’s efforts to develop a revamped version of its best-selling 737 as it narrows a gap with a model produced by European rival Airbus. The deal includes 201 revamped “737 MAX” aircraft and 29 Next-Generation 737-900 extended range planes.  Boeing shares rose as much as 1.5 percent Thursday, but were down 0.6 percent at $65.96 in afternoon trading, compared with a 1.6 percent fall in the broad S&P 500 Index. Shares rebounded slightly by the closing bell, ending the day at $66.09, down 0.38%.

Alex Hamilton, managing director with EarlyBirdCapital in New York, said these large orders confirm that the commercial aerospace sector is bouncing back despite a turbulent and uncertain global economy. He said he expected more airplane orders as oil prices top $100 a barrel. “The reason (airlines) are ordering these new aircraft is because of the technology and the need for fuel efficiency.” High oil prices are spurring orders worth billions for fuel-efficient aircraft. Oil prices fell Thursday on worries about the European debt crisis. Brent crude was down $3.50 at $108.38 a barrel, while U.S. crude was $3.06 lower at $99.53.
The Boeing 737 is the backbone of many airline fleets and helped drive the growth of the low-cost travel industry. The 737 MAX is an upgraded version of Boeing’s best-selling 737 that will include new fuel-efficient engines and begin delivering in 2017. It is designed to compete with the Airbus A320neo in the narrowbody aircraft segment, which is expected to produce $2 trillion in sales over 20 years.