Sears Holding Post Q1 Profit, Not A Good Sign?

I do not know about you, but it seems like Sears Holding (SHLD) has been on a downward spiral for the last couple of years. I remember not too long ago everybody was raving about how this company was doing it right. Well guess again. Since than, the company’s profit has been declining and sales faltering. The stock alone has gone from $190 to $55; however, are things starting to improve for the once highly thought of retailer?

During this recent round of company earnings, it has not been a surprise for companies to beat expectations. After all, most people just kept the bar extremely low. While it is still somewhat of a shock that Sears beat expectations, the fact that they actually posted a profit was even more surprising. Is this to mean the turnaround for the company? Should we start loading up on the beaten down stock in hopes of it coming back into the high 100′s?

NO! While the company did post a profit for quarter 1, there is still a lot to be skeptical about. A big fact that stands out to me is that, altough there was a profit, sales were considerably lower. A main cause for the profit was inventory control. The idea that Sears had inventory left over and able to conserve on adding to it, played a huge part in Sears posting a profit.

How long can this trend last? Sears will not be able to continue this same practice of inventory management forever. As sales continue to decline it is only a matter of time before the profits continue to keep pace.

So, while a few may have been lucky to profit off the recent spike, do not get your hopes up. Take your profit and run because Sears still has a lot of problems to solve. I would even go as far as to add this to the black list.