Shares of department store retailer Sears Holdings Corp. (NASDAQ: SHLD) have moved higher this morning, despite the fact that the company posted a 47.5% decline in fourth-quarter profit, hurt by increased markdowns and weak sales of its products.

The retailer announced that its quarterly profit dropped to $426 million, or $3.17 a share on declining margins as sales at its Kmart and Sears stores slipped due to the weak U.S. economy and increased competition. These numbers are down from $811 million, or $5.27 per share reported in the same period a year ago.

Included in the company's earnings numbers was a one-time gain related to the sale of some assets. Excluding that, Sears earnings numbers would have come at $3.04 per share. Analyst estimates (which typically exclude one time items) was for $3.10 per share in the quarter.

Eddie Lambert may have to loan Sears Holdings (NYSE: SHLD) some money. Cash at the company be getting very tight. According to the Wall Street Journal, "some analysts wonder whether falling sales, slimmer profit margins and other woes are causing cash flows to decline to a level that could hinder a turnaround."

The last cash balance that Sears announced was lower than most analysts expected. If the company needs to spend money to improve its stores or increase inventory in products it thinks will sell well, it could draw down the cash level even further.

For Lampert, the bad news keeps getting worse. Sears stock has staged a mini-rally over the last two weeks, moving from below $85 to $103. News about cash problems could push the shares back down.

Lampert made the classic error of thinking that with Sears and K-Mart 1+1=3. In reality, he took two weak companies and saved some money in a merger. The problem was that the companies got even weaker.

Who says that hedge fund managers don't make good corporate chiefs?

Douglas A. McIntyre is an editor at 247wallst.com.

MAJOR PAPERS:

• The Wall Street Journal reported that IAC/InterActiveCorp's (NASDAQ: IACI) CEO Barry Diller is in talks with outside investors or possible buyers for all four companies that he plans to spin off, according to a person familiar with the situation.

OTHER PAPERS:

• Biogen Idec Corporation (NASDAQ: BIIB) may be considering an offer for Genmab (OTC: GNMSF), according to the UK Times; GlaxoSmithKline Plc (NYSE: GSK), which has a license for Genmab's HuMax, may have to counterbid in order to protect its position.
• The Economic Times reported that Sears Holdings Corporation (NASDAQ: SHLD) may be interested in launching operations in India.

WEB SITES:

• According to a source close to Yahoo! Inc (NASDAQ: YHOO), CEO Jerry Yang has decided to go forward with layoffs at the company. The source said that the layoffs will come in the 1,500-2,000 range instead of the "hundreds" reported elsewhere, the Silicon Alley Insider reported.

Shares of Sears Holdings Corp. (NASDAQ: SHLD) have been plunging this morning after the company posted disappointing same-store holiday sales. Based on its weak results, the retailer also cut its fourth-quarter and full-year earnings outlooks.

A look at the company's same-store sales, a key indicator of retailer performance that measures growth at existing stores, reveals a decline of 3.5%. Sears saw its domestic same-store sales fall during the holiday season, hurt by weakness in Kmart's seasonal categories and its apparel and tools. According to the retailer, Sears domestic same-store sales fell 2.8%, while Kmart same-store sales tumbled 4.2%.

Sears believes its weak holiday sales and lower profit margins were caused by strong competition, the slumping housing market and credit crisis which increased consumers' fears and made them curb their spending.

Sears Holding (NASDAQ: SHLD) is recently down $10.42 to $85.75 in pre-open trading.

SHLD guided fourth-quarter and year earnings below expectations on a decrease in same-store holiday sales, lower profit margins, increased competition and unfavorable economic conditions.

SHLD overall option implied volatility of 55 is above its 26-week average of 42 according to Track Data, suggesting larger risk.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Sears Holding (NASDAQ: SHLD) is recently down $5.25 to $91.14. SHLD call option volume of 22,045 contracts compares to put volume of 31,005 contracts. SHLD January 90 straddle is priced at $8.60. SHLD February call option implied volatility is at 55, puts are at 67, above its 26-week average of 41 according to Track Data, suggesting larger risk.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Sears Holdings (NYSE: SHLD), which has been lately for poor quarterly results, said this week that it will reduce the use of Polyvinyl Chloride (PVC) from plastic packages in its stores.

Sears said that it has adopted a policy of identifying more sustainable choices for product packaging in an effort to reduce "environmental risks tied to the manufacture, use and disposal of PVC."

Kudos to Sears here. However, if this story is being pitched as a good piece of PR in a year filled with performance disappointments from the retailer, why now? Chairman Eddie Lampert has lashed out at critics who continue to complain about the horrid retail performance of the combined Sears/K-Mart, although Lampert's use of Sears Holdings as a cash-flow company (as opposed to a retailer) is still under review by the market -- and misunderstood, according to many.

Regardless, every retailer should look at alternatives to PVC for all those hundreds of millions of plastic packages that eventually end up in landfills. Packages that break down naturally should be the packaging material of choice, and when Sears makes this kind of commitment, other retailers should follow. A press release from an under-performing company may be worth more as a motivator to other companies than as a rescue effort for the company's sullied reputation.

Recently 24/7 Wall St. ran a list of CEOs who may need to go back to business school. The performance of their companies has been so poor that they need a period of re-education, some tutoring in the basics.

The 24/7 list included the heads of AMD (NYSE: AMD), Boston Scientific (NYSE: BSX), McClatchy (NYSE: MNI), Level 3 (NASDAQ: LVLT), Yahoo! (NASDAQ: YHOO), Countrywide Financial (NYSE: CFC), and Morgan Stanley (NYSE: MS). None of them have done shareholders any favors even if stock price is the only measurement.

But, it is time to add a few more names to the list.

Starbucks (NASDAQ: SBUX): These shares are now off to $22.49, near a 52-week low. The shares have a period high of $37.14. James Donald has the CEO job at Starbucks, but the founder Howard Schultz is still around. Wall Street could certainly argue that the company has made a lot of mistakes starting with overbuilding stores in the US. Another is that the new menus in the stores seem to be have been decided by random. If the company cannot improve same-store sales soon, the stock will go lower. This seems basic, but SBUX has not given shareholders any plan for addressing it.

Blockbuster (NYSE: BBI): It is hard to have blown the lead that Blockbuster had in movie distribution. But it did. CEO James Keyes does not seem to have any logical vision about how to solve the company's problem, which is that digital distribution has passed it by. He argues that customers will go to kiosks at Blockbuster stores to download movies. Instead of doing it at home on the internet? Or getting the DVD in the mail? Not much of a plan.

Sears Holdings (NASDAQ: SHLD): The name on the CEO's door at Sears is Aylwin Lewis. But Eddie Lampert is the chief. The marriage of K-Mart and Sears has been a disaster. Same-store sales at both companies run below the industry average. It would be very hard to argue that the merchandising programs at the retail outlets is compelling enough to bring in new customers. Lampert exhibited poor judgment in sending out a letter that was picked up by the press. His defense of the company was that it had reduced debt and bought back shares. That will help a lot when his stores are empty.

Douglas A. McIntyre is an editor at 247wallst.com.

Not so long ago, Sears (NYSE: SHLD) had become something of a value glamor stock. Journalists waxed about hedge fund manager-turned-Sears chairman Eddie Lampert's plan to turn the company into an investment vehicle -- comparisons to Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) were ubiquitous.

After yet another terrible quarter, Sears is down nearly 50% from its 52-week high, Herb Greenberg has even suggested that CEO Alwyn Lewis could be shoo-in for his Worst CEO of the Year Award.

Lampert's reputation as Sears chairman has gone from the penthouse to the outhouse pretty quickly, and he's not too happy. In fact, he's lashing out at critics. In a letter to employees on Friday, he wrote that:

While we were not pleased with these results, much of the commentary in the media and on Wall Street following the results ignores the strength of our company and the progress that we have made . . .

Sears Holdings Corporation (NASDAQ: SHLD)'s profit plunged 99% to $2 million or a penny per share from $196 million, $1.27 a share, as sales declined and margins plummeted. (Excluding one time gains, income in the same quarter last year was 85 cents per share).

Sales for the quarter slipped 3% to $11.5 billion from $11.9 billion in the fiscal 2006 period.

The results widely missed the 50 cents per share consensus estimate of analysts surveyed by Thomson Financial.

Moreover, Sears also warned it expects difficult economic conditions to persist in the near-term, affecting sales and gross margin through the rest of the year.

When Sears Holdings (NYSE: SHLD) reports Q3 earnings tomorrow, we'll see again if chairman and out-of-his-retail-league financier Eddie Lampert will wow investors.

Regardless of how its retail operations have performed, how is Sears doing when it comes to returning equity to shareholders? Now that William Ackman has taken a 3.5% stake in the holding company (oops, retailer), will that investment start paying off tomorrow? Lampert still controls 46% of the retailer, so with activist investor Ackman's new slice, it's unclear if he'll soon be forcing any changes at the company. But, in previous stints, Ackman has forced real estate sales and similar actions at large food service companies and other retailers to get his return. Things are different in Lampert-land, though.

The company has so far underperformed from the retail side of the business, and it's probably forced Lampert to wake up and and realize he has to ensure those operations continue to perform. Analysts polled by Thomson Financial expect a profit of $0.50 on revenue of $11.61 billion tomorrow.

Will we see that? Perhaps. It is still not clear how long it will take Lampert to unlock the value of his grand masterpiece, but so far it's either not working and impatience from the market is bubbling up.

Specialty retailer Restoration Hardware (NASDAQ: RSTO) was supposed to be sold to private equity firm Catterton Partners for $6.70 a share. But, so much for the "done deal," the "sure thing." Late yesterday, Sears Holdings (NASDAQ: SHLD) bought 13.9% of the smaller company's shares.

According to CNN Money, "Sears said it may make a tender offer for all of Restoration Hardware's shares or raise its stake by buying additional shares on the open market." RSTO shares rose to $7.46 after hours.

But with Sears in such deep trouble of its own, why is it fooling around with buying a small retailer with a $250 million market cap, $800 million in sales, and shaky profitability?

Why, indeed? Shareholders in Sears would have a right to be upset. Head man Eddie Lampert would have people believe that his retail giant, which combines Sears and K-Mart, is the picture of efficiency and smart merchandising. Why then, are its shares at a 52-week low of just above $114 a share?

Sears can't waste its time buying little companies. It has too many big problems of its own.

Douglas A. McIntyre is an editor at 247wallst.com.

Ed Lampert built his reputation as a big-time hedge fund manager. He then took control of Sears Holdings (NASDAQ: SHLD) and bought K-Mart. That did not work out very well. Shares in Sears are down 25% this year and trade around their 52-week low.

The whole Sears thing is obviously embarrassing for someone who is used to making himself and his investors billions of dollars.

Lampert figured that since retail was not working out, he would try his hand at investing in banking. It seemed like a good idea. How much can go wrong with a big bank? Citigroup (NYSE: C)'s shares were under-performing the market in the middle of the year, so Lampert built up a stake of $1.3 billion, according to The New York Times. The shares are held by "RBS Partners, an affiliate of Mr. Lampert's ESL Investments."

Things have not gone well at Citi, so Mr. Lampert has lost about $471 million since late June.

Is there a lesson here? Probably nothing beyond the fact that smart people sometimes do stupid things.

Douglas A. McIntyre is an editor at 247wallst.com.

Sears Holdings (NASDAQ: SHLD) -- as well as most other retail outlets -- is taking a dive this morning after the Labor Department reported the biggest increase in the number of jobless claims since February. Worries of a weak consumer environment going into the holiday season have weighed heavily on retail, with several stocks across the sector trading at new 52-week lows today. Sears is hit particularly hard by reports like these because the company does not report its interim data between earnings releases. All investors in SHLD have to go on in the quarterly report, similar companies' performances and broad economic data. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on SHLD.

After hitting a one-year high of $195.18 in April, the stock slipped to a 52-week low of $123.39 in September. This morning, SHLD opened at $134.66. So far today the stock has hit a low of $132.12 and a high of $134.75. As of 11:05, SHLD is trading at $132.61, down $2.61 (-1.9%). The chart for SHLD looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

Sears Holdings Corp. (NASDAQ: SHLD) the hedge fund ... err, retail chain headed by hedge fund star Eddie Lampert, may see renewed pressure to sell off some it its valuable real estate soon. Notable activist investor William Ackman will see to it, as his fund, Pershing Square Capital Management, has acquired five million shares of the retailer. Mr. Ackman, who battled Lampert last year for control over Sears Canada, is set to have another celebrity deathmatch with him again soon, I'd suspect.

It's no surprise to anyone that Lampert's real mission with Sears Holdings is not the operational efficiency (or even profit) of the retail side of things; that's just a side mission probably talked about a few minutes at each board meeting. What Lampert did with Sears was to make it a holding company -- but the truth is, he owns so much of it that Ackman's potential advances may be akin to ascending a steep hill with slippery shoes on his feet. The New York Post even says that Ackman's buy-in was for "a long term investment" more than any moves to get Sears on the property-unloading trail.

Still, Ackman's purchase makes him the fourth-largest SHLD shareholder, and it's hard to imagine him wanting those shares for some kind of "long term investment" -- it just doesn't suit Ackman's profile at all. He's said before that the combined value of Sears' real estate is valued more than Lampert's $22 billion figure, and that difference provides a nice "cushion" should the retail end of things continue to falter. Sears' retail operations are going nowhere these days since there appears to be little direction to that end of the business. I submit that Ackman wants to break it all up and sell some real estate, Gekko-style. That, or he does not deserve the title 'activist investor.'