Hey Eddie, The Iceberg Is Dead Ahead!

Implications: Sears stores sales down 9.8%, Kmart down 7.1%, and comp stores down 8.6%, all supposedly due to the price of gas and food. Q1:08 EPS -$0.53 v. consensus of +$0.15.   While the interim CEO, Bruce Johnson, blames outside events for the poorer-than-expected showing, he also makes a puzzling comment that he "expects higher EBITDA for the full year". This comment alone will provide fodder for the faith of all the SHLD supporters to hold onto until the next crisis. It will also provide some interesting commentary from observers like me who have questioned the veracity of almost every pronouncement  of Sears management since the merger with Kmart.

Analysis: As this article purports to show, Sears continues their downward slide at an increasingly faster pace.  They have gone from a disastrous 3rd and 4th Quarter of 07 to an even more disastrous 1st Quarter of 08. 

With little to offer except "more of the same" by their interim CEO, were it not for his comment about "higher EBITDA for the full year", it would be reasonable to begin speculating about when they stop circling and start going down the drain.  However, now that Mr. Johnson has made the comment, we simply can not let it go unchallenged or unexamined.

In order to achieve a "higher EBITDA" Mr. Lampert would have to find a way to either add 20% to gross profits or reduce the already skeleton expenses by 14%.

If he is able to pull this off over the next three quarters, even I will become a fan. If not, I see nothing on the horizon except the continued copy cat behavior of their "twin brother", Montgomery Ward!