June 17, 2008

"Sears Posts Unexpected Loss," blared the instant headline after Sears Holdings (SHLD) most recent earnings announcement.

But the results weren't 'unexpected' here at ChangeWave, where we've been picking up dismal results for Sears dating back to our November 2007 Consumer Holiday Spending survey.

"Sears and Bed, Bath & Beyond (BBBY) are going to have the weakest holiday season" of the retailers we surveyed, we said at the time.

During 2008, Sears has continued reeling in each of our subsequent ChangeWave consumer surveys. Here's what's happened to its stock price during this time period: (the red arrows represent each our last five consumer surveys)

In our most recent consumer survey (May 2008), we again asked consumers about their spending patterns for the next 90 days. As you can see below, Sears has now fallen into last place, with just 4% of consumers saying they plan to spend More money at the retailer and 13% Less (Net Score = -9).

Yet even as Sears has plummeted, Wal-Mart (WMT) and Costco (COST) have remained two of the biggest stars in ChangeWave's consumer surveys during 2008. And going forward the two discount retailers continue to show tremendous strength, as sharply lower spending and higher inflation - coupled with deteriorating housing values - have conspired to produce a transformation in retail shopping.

Based on our ChangeWave survey results, Wal-Mart and Costco will continue to outperform this summer. That's bad news for Sears, which has proved unable to take a page from Costco or Wal-Mart's play book.

Expect more bearish news for Sears in the months ahead.