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Sears Holdings Corp  (NAS:SHLD) Operating Income: $-1,145 Mil (TTM As of Jul. 2017)

Sears Holdings Corp's Operating Income for the three months ended in Jul. 2017 was $-106 Mil. ts operating income for the trailing twelve months (TTM) ended in Jul. 2017 was $-1,145 Mil.

Operating Margin % is calculated as Operating Income divided by its Revenue. Sears Holdings Corp's Operating Income for the three months ended in Jul. 2017 was $-106 Mil. Sears Holdings Corp's Revenue for the three months ended in Jul. 2017 was $4,365 Mil. Therefore, Sears Holdings Corp's Operating Margin % for the quarter that ended in Jul. 2017 was -2.43%.

Good Sign:

Sears Holdings Corp operating margin is expanding. Margin expansion is usually a good sign.

Sears Holdings Corp's 5-Year average Growth Rate for Operating Margin % was 22.40% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition. Sears Holdings Corp's annualized ROC % for the quarter that ended in Jul. 2017 was -82.46%. Sears Holdings Corp's annualized ROC (Joel Greenblatt) % for the quarter that ended in Jul. 2017 was -13.87%.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Sears Holdings Corp Annual Data

Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17
Operating Income Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only -838.00 -927.00 -1,508.00 -1,000.00 -1,978.00

Sears Holdings Corp Quarterly Data

Oct12 Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Apr17 Jul17
Operating Income Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only -269.00 -624.00 -717.00 302.00 -106.00

Calculation

Operating income, is the profit a company earned through operations. All expenses, including cash expenses such as cost of goods sold (COGS), research & development, wages, and non-cash expenses, such as depreciation, depletion and amortization, have been deducted from the sales.

Sears Holdings Corp's Operating Income for the fiscal year that ended in Jan. 2017 is calculated as

Operating Income(A: Jan. 2017 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=22138-17452-6109
-Research & Development-Depreciation, Depletion and Amortization-Others
-0-375-180
=-1,978

Sears Holdings Corp's Operating Income for the quarter that ended in is calculated as

Operating Income(Q: Jul. 2017 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=4365-3394-1369
-Research & Development-Depreciation, Depletion and Amortization-Others (1)
-0-83--375
=-106

Operating Income(Q: Jul. 2017 )
=EBITDA-Depreciation, Depletion and Amortization-Others (2)
=-23-83-0
=-106

Operating Income for the trailing twelve months (TTM) ended in Jul. 2017 was -624 (Oct. 2016 ) + -717 (Jan. 2017 ) + 302 (Apr. 2017 ) + -106 (Jul. 2017 ) = $-1,145 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.


Explanation

1. Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition.

Sears Holdings Corp's annualized ROC % for the quarter that ended in Jul. 2017 is calculated as:

ROC %(Q: Jul. 2017 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (Q: Apr. 2017 ) + Invested Capital (Q: Jul. 2017 ))/2)
=-424 * ( 1 - -4.15% )/( (701 + 370)/2)
=-441.596/535.5
=-82.46 %

where

Invested Capital(Q: Apr. 2017 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Total Equity - Cash
=3329 + 1135 + -3527 - 236
=701

Invested Capital(Q: Jul. 2017 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Total Equity - Cash
=2635 + 1598 + -3651 - 212
=370

Note: The Operating Income data used here is four times the quarterly (Jul. 2017) operating income data.

2. Joel Greenblatt's definition of Return on Capital:

Sears Holdings Corp's annualized ROC (Joel Greenblatt) % for the quarter that ended in Jul. 2017 is calculated as:

ROC (Joel Greenblatt's)(Q: Jul. 2017 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=EBIT/Average of (Property, Plant and Equipment+Net Working Capital)
     Q: Apr. 2017  Q: Jul. 2017
=EBIT/( ( (Property, Plant and Equipment + Net Working Capital) + (Property, Plant and Equipment + Net Working Capital) )/2 )
=-424/( ( (2130 + max(1026, 0)) + (1969 + max(989, 0)) )/2 )
=-424/( ( 3156 + 2958 )/2 )
=-424/3057
=-13.87 %

where Working Capital is:

Working Capital(Q: Apr. 2017 )
=(Accounts Receivable + Total Inventories + Other Current Assets) - (Accounts Payable & Accrued Expense + Defer. Rev. + Other Current Liabilities)
=(479 + 3884 + 339) - (1254 + 725 + 1697)
=1026

Working Capital(Q: Jul. 2017 )
=(Accounts Receivable + Total Inventories + Other Current Assets) - (Accounts Payable & Accrued Expense + Defer. Rev. + Other Current Liabilities)
=(370 + 3433 + 548) - (972 + 704 + 1686)
=989

When net working capital is negative, 0 is used.

Note: The EBIT data used here is four times the quarterly (Jul. 2017) EBIT data.

3. Operating Income is also linked to Operating Margin:

Sears Holdings Corp's Operating Margin % for the quarter that ended in Jul. 2017 is calculated as:

Operating Margin %=Operating Income (Q: Jul. 2017 )/Revenue (Q: Jul. 2017 )
=-106/4365
=-2.43 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

4. Please click Growth Rate Calculation Example (GuruFocus) to see how GuruFocus calculates Wal-Mart Stores Inc (WMT)'s revenue growth rate. You can apply the same method to get the operating income growth rate using operating income per share data.


Be Aware

Compared with a company's EBITDA margin, Operating Margin can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).

If a company is facing competition, its Operating Margin may decline. Often the Operating Margin declines well before the company's revenue or even profit decline. Therefore, Operating Margin is a very important indicator of whether the company is facing problems.

For instance, by 2012, Nokia (NOK)'s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokia's Operating Margin had already been in decline since 2002, although its earnings per share were still rising. Investors who paid attention to Operating Margin would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).

Therefore, Operating Margin is a very important screening filter for GuruFocus. GuruFocus's Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.


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