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Earnings preview: Will Sears surprise in Q3?

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Sears (NASDAQ: SHLD) is scheduled to report earnings for the third quarter on Tuesday, December 2. The expectation is for a loss of $0.49 per share. I think it's therefore safe to say that the retailer won't be turning a profit.

Sears has been one awful retail story as of late. Actually, just about every retailer has been awful as of late. It's no surprise, of course, considering the economy. But Sears has been experiencing challenges even beyond what can be explained by the economy. The company has been missing estimates, same-store sales haven't been great, and if you take the time to talk to people about Sears, or if you follow the comments of pundits, you'll sometimes note a tone of repulsion when it comes to the big chain.

I haven't been a fan of the shopping experience at Sears either, and it's been a very, very long time since I've stepped into a Kmart. In fact, there isn't a Kmart close to me. Eddie Lampert's enormous task of helping to turn this ship around is not one I envy. Of course, many retailers make the mistake of only focusing on merchandising in the stores and figuring out what should be in the weekly circulars. Don't get me wrong, that's important stuff. But Sears needs to engage a branding campaign to make people feel good about its stores, to feel confident about the shopping environment. When you look at TV ads by Wal-Mart (NYSE: WMT) and Target (NYSE: TGT), you can't help but marvel at the branding acumen of those retailers. Sears needs to get creative, too.

Come Tuesday, I expect Sears to report dismal numbers.

Let me give you a preview of what I intend to do if Sears beats expectations and the market gets all excited and the stock pops to the upside: nothing. Absolutely nothing. My bearish tendencies on the stock have only increased since I reported on the company's Q1 numbers. I don't know if it's a perfect short right here considering that the stock would conceivably follow the market to the upside if sentiment improves, but I cannot see buying Sears for any reason.

Besides, I don't have confidence that the company can beat Wall Street's numbers (and Sears is certainly going to have a tough Christmas as Douglas McIntyre makes clear). I hope Eddie Lampert and his colleagues are working overtime to get this retailing house back in order.

Disclosure: I don't own any company mentioned; positions can change at any time.

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Last updated: November 25, 2009: 07:36 AM

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