Sears Holdings (NAS: SHLD) shares jumped in May, but that event shouldn't have tempted investors to jump into this beleaguered retail stock. There are far more reasons to sell shares of Sears than to buy them. Here are three.

Pale profits: On May 17, Sears actually pulled off a profitable quarter ... because the company sold some assets. In other words, Sears didn't show any signs that it remembers how to actually be a decent retailer (a very long-standing problem). Right now, it's kind of like Sears is selling its organs, which brings in money in the near term but is ultimately unsustainable.

Sears' comparable-store sales in all three of its units all decreased, and total revenue fell 2.8%. Without the asset sales, Sears generated a loss of $0.31 per share. One-time gains should fool no one into thinking Sears is really in much better shape than it was six months ago, or last year for that matter.


Retail identity crisis: It's hard to be as messed up as Sears when it comes to having little or no competitive advantage in a crowded retail landscape. J.C. Penney (NYS: JCP) strikes me as similarly challenged, but at least it has some interesting initiatives that could woo some additional customer traffic, such as its Sephora shops within J.C. Penney stores.

The market for low-priced merchandise contains plenty of formidable (and in some cases, even desperate) competition. Target (NYS: TGT) is known for its cheap chic and has been trying new attractions, such as merchandise from designers like Missoni and Jason Wu and adding limited-time "boutique shops" within some of its stores.

Wal-Mart (NYS: WMT) has a lot to prove when it comes to wooing U.S. shoppers back into its stores, and last quarter it did just that. Best Buy's desperate to draw in customers, too, and should it get its act together, Sears' outlook becomes worse than it already is.

Last but not least, Costco (NAS: COST) sells cut-rate goods to higher customer demographics and commands extremely high customer loyalty. Where's Sears' advantage among formidable retail rivals like these? There's very little room for Sears Holdings and its Kmart unit in this cutthroat competitive landscape;

Painful debt: One of the worst things about Sears is its unattractive balance sheet. It has just $777 million in cash at this point, and $3.23 billion in debt. Its total debt-to-equity ratio is 70%. Debt's particularly dangerous when a company is already on poor operational footing. Sears is expected to continue to report dwindling sales and losses for years to come.

Ask those who invested in Borders why such a situation could be a recipe for disaster.

Sears may have some assets to sell off, but lingering investors should simply sell off their Sears shares. It would take a miracle to truly turn Sears around, and miracles are in short supply these days.

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The article 3 Reasons to Sell Sears Holdings originally appeared on Fool.com.

Alyce Lomax owns no shares of any of the companies mentioned. The Motley Fool owns shares of Costco and Best Buy. Motley Fool newsletter services have recommended buying shares of Costco and creating a diagonal call position in Wal-Mart Stores. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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