Why Sears Holdings Stock Bounced Today

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What happened

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Shares of Sears Holdings (NASDAQ: SHLD) were moving higher today after the ailing retailer posted third-quarter results that weren't as bad as expected. The company managed to narrow its net loss from $748 million a year ago to $558 million as it closed stores, helping to eliminate bloated operating expenses. As a result, the stock opened up 27.6%, but the gains had moderated to 5% by 11:08 a.m. EST.

So what 

While the narrower loss may be a sign that the company is moving in the right direction, the underlying performance was still atrocious. Overall comparable sales fell 15.3%, with Sears declining 17% and Kmart losing 13%. Revenue slid 27.2% to $3.66 billion, which was ahead of estimates at $3.34 billion. On the bottom line, its adjusted loss per share improved from -$3.11 to -$2.64, which also beat expectations at -$4.46.

CEO Eddie Lampert noted "a challenging retail landscape continuing to pressure sales," and he also continued to tout the company's Shop Your Way loyalty program, which has yet to show meaningful results.

Now what 

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Overcoming a low bar will only get Sears so far, and while the company did succeed in narrowing its bottom-line loss, that seems to be more a result of the overall business shrinking rather than a meaningful improvement in operations. Meanwhile, suppliers continue to put the squeeze on the retailer, or abandon it altogether as Whirlpool did last month. 

Given the poor state of stores and fleeing suppliers, even a strong holiday season won't save the stock. I'd expect the recent gains to be short-lived.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.