Sears Holdings shares soared more than 60%, to $64, from late August to early October, an extraordinary performance, particularly in a flat market. But investors shouldn't mistake the runup for signs of improvement in the beleaguered retailer's fortunes.
Sears, controlled by hedge-fund manager Edward Lampert and ESL Investments, has been operating in the red for several years, and more losses are expected this year and next. Moreover, the company's real-estate portfolio—Sears owns almost 2,500 Kmart and Sears stores in the U.S. and Canada—could be worth considerably less than the market assumes, especially if Sears continues to sell stores to raise cash, as it has done in the past 18 months. Some skeptics think Sears (ticker: SHLD) is worth only $20 to $25 a share, based on the retailer's dim prospects and the appraised value of similar properties. The shares closed last week at $54.89.