Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

J.C. Penney Company, Inc. (JCP), The Home Depot, Inc. (HD), Sears Holdings Corporation (SHLD): It’s Not Just the Economy, Stupid!

Although we don’t believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes — just in case they’re material to our investing thesis.

U.S. stocks opened higher this morning, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average up 0.53% and 0.2%, respectively, as of 10 a.m. EDT.

Retail: The final chapter

Last Friday, I called general-merchandise retailers’ poor quarterly results the most important trend of last week for what it revealed about consumer spending. Yesterday’s earnings report from the nation’s No. 2 retailer, Target, did nothing to alleviate that concern.

Sears Holdings Corporation

This morning, Sears Holdings Corporation (NASDAQ:SHLD) reported its fiscal second-quarter results, and the news was no better. The company posted a loss of $1.70 per share (ex-items) versus Wall Street’s expectations of a $1.10 loss. Sales, which fell 6.3% year on year to $8.9 billion, fell short of the consensus estimate of $9.5 billion. Same-store sales in the U.S. fell 1.5%, split between declines of 2.1% for Kmart and 0.8% at Sears Holdings Corporation (NASDAQ:SHLD) Domestic.

Let me be clear, however, that these numbers reflect more than weak consumer demand. For example, Sears Holdings Corporation (NASDAQ:SHLD) stores posted weak sales in appliances, a category in which major competitors The Home Depot, Inc. (NYSE:HD) and Lowe’s put up good numbers over the same period. Sears Holdings is controlled by hedge fund manager Edward Lampert, who now runs the company, too, after previous CEO Louis d’Ambrosio left earlier this year due to a family medical problem.

Between Bill Ackman at J.C. Penney Company, Inc. (NYSE:JCP) and Eddie Lampert at Sears Holdings Corporation (NASDAQ:SHLD), the recent record of hedge fund managers trying to revive once-prominent retailers serves as a cautionary tale. Lampert may have modeled his investing style on that of Berkshire Hathaway CEO Warren Buffett, but you won’t catch Mr. Buffett trying to run the Nebraska Furniture Mart (one of Berkshire’s businesses).

And speaking of J.C. Penney Company, Inc. (NYSE:JCP), its Ackman experience was so traumatic that, only this morning, the company announced it had adopted a one-year “poison pill” that prevents any single investor from owning more than 10% of its shares. No excuses for Penney, then — they will no longer be able to say, “And we would have succeeded if it wasn’t for those meddling hedgies!”

The article Sears: It’s Not Just the Economy, Stupid! originally appeared on and is written by Alex Dumortier, CFA.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.