Sears' Disturbing State Explained by This One Data Point

NEW YORK (TheStreet) -- The second-quarter, 10-Q filing from department store icon Sears (SHLD) is a whopping 68 pages, detailing everything from credit agreements, to the number of store closures, to sales by merchandise department.

Investors need only pay attention to a single line item to grasp the prolonged financial tailspin at the retailer: gross profit margin.

See More: 12 Photos That Show How Macy's Is Dismantling Sears

In the second quarter, gross margin at Sears' Kmart division fell 250 basis points year over year, amid "decreases experienced in a majority of categories, particularly apparel, home and grocery & household," Sears said. Sears said domestic gross margin at its namesake division shed 330 basis points year-over-year due to "decreases experienced in a majority of categories, most notably apparel, home appliances, tools and footwear."

For comparison, the U.S. divisions of Walmart (WMT) and Target (TGT) registered year-over-year gross margin declines of 7 basis points and 100 basis points, respectively.

Not only does Sears continue to be burdened by a great deal of fixed costs rooted in a vast store network, but the company is giving away its margins via its Shop Your Way rewards program and traditional promotional marketing in the hopes of securing transactions. The problem for Sears: It doesn't have much to show for these investments in the form of consistently positive same-store sales. 

Watch More: Walmart's Financial Problems Explained in 5 Photos and One Vine Video

Sears reported net sales of $8.01 billion, short of the $8.17 billion forecast of Wall Street analysts as compiled by Yahoo Finance. Sales were led by the domestic Sears business, which had a 0.1% same-store sales increase vs. a year earlier drop of 0.8%. The increase at domestic Sears reflected "increases in the home appliances and mattress categories, partially offset by decreases in the consumer electronics and lawn & garden categories, as well as a decline in Sears Auto Centers."

In the 10-Q filing, the company presented investors with year-over-year sales declines ranging from a staggering 31.25% in apparel and soft home to a 33.33% fall in food and drug, and a meager 3.2% increase in a category classified as "other."

If you liked this article you might like

These Are the Top 50 Jobs in the U.S. Right Now

Cramer: Dominoes Are in Play Today

Toys 'R' Us Bankruptcy Filing a Reminder That Amazon Is Crushing Everyone

Kohl's to Accept Amazon Returns in 82 Stores and Yet Stock Does Nothing

Wall Street Overlooks Trump's North Korea Threats to Hit New Records