One can't blame Sears Holdings (SHLD) for not wanting to share its second quarter results. 

The dying owner of the Sears and Kmart brands was scheduled to report its latest results today before the market open. For unknown reasons, it opted to put off the release until after the close. Shares cratered 9% on the session. And while embattled Sears CEO Eddie Lampert tried to put lipstick on a pig, the second quarter did little to suggest the company is pulling itself out from the grave.

Sears reported a net loss of $4.68 a share, worse than the year ago loss of $2.33 a share. The adjusted EBITDA loss tallied a whopping $112 million versus a loss of $66 million a year ago. Considering Sears has been aggressively closing stores and consolidating its operations to cut costs, the loss is a disappointment. 

"While we are encouraged by the improved comparable stores sales trend we experienced in the second quarter, and the positive comparable store sales of 3.0% and 2.5% achieved in the months of July and August, respectively, we have yet to achieve our goal of returning the company to profitability. We continue to close unprofitable stores, and we are hopeful that we can stabilize our store base at a meaningful level in the near future. Our goal is to right-size our store footprint to a solid base from which we can operate and grow profitably, while leveraging our online and Shop Your Way platforms," Lampert said in a statement. 

Shares of Sears rocketed 13% higher in Friday trading as the market focused on the retailer's sales turning positive in July and August. 

By the Numbers: Sears Second Quarter

But, the enthusiasm around Lampert's comments may be badly misplaced. After all, despite positive same-store sales in July and August the company still posted a steep net loss for the quarter 

The poor health of Sears ahead of the holiday season could be extracted from the company's 10-Q filing.

Here are several red flags TheStreet uncovered.


Sears used an enormous $1 billion in cash from its operations in the first half of 2018. The company ended the second quarter with a meager $198 million in cash and equivalents. It had a mere $98 million available left to borrow under a $1.5 billion credit facility. 

If Sears doesn't unload more assets soon, cash from the holiday season may not be enough to sustain the business deep into 2019. 


Same-store sales at Sears dropped 4%. The company saw continued sales declines in the home appliances, mattresses, and consumer electronics categories, as well as Sears Auto Centers. Sales in apparel, toys and jewelry increased. 

Excluding one-time items, Sears gross profit margin fell 80 basis points from the prior year amid pressure in home appliances. The department store chain's margins were also hit by more customers redeeming Shop Your Way promotional points. 

In effect, Sears sales continue to be propped up by discounting and liquidation sales at closing stores. That's not a picture of health for a retailer. 


Same-store sales at Kmart declined 3.7%. Kmart's sales fell in the pharmacy, grocery and household and drugstore categories. Sales gained in apparel, toys and footwear. 

Excluding one-time items, Kmart's gross profit margins plunged 330 basis points from a year ago. Pressure was felt in most product categories.