Dive Brief:

• Sears Holdings Corp. Thursday unveiled its first profitable quarter in more than three years.

• But same-store sales fell 10.8%, with consumer electronics taking a hit, and total revenue fell 22.5 % to $6.21 billion. Q2 same-store sales at Sears stores fell 14% and at Kmart stores fell 7.3%.

• The profit accrued thanks to the sale of 235 stores and its 50% interest in a REIT, which garnered the company $2.7 billion.

Dive Insight:

Sears is in the black, but is facing a large amount of skepticism nevertheless. 

The massive shift of Sears’ formidable real estate portfolio into its own investment trust has accomplished what it was intended to do—restore some order to the retailer’s dismal balance sheet. That could buy the struggling, once-iconic retailer the time it says it needs to turn around, and the retailer swears it has the momentum to accomplish that.

The retailer isn’t alone in its confidence; others see the retailer doing just the right things, things that bring down the bottom line in the short term but that have long-term growth potential. And many have praised the company’s Shop Your Way program, a somewhat unique loyalty program that includes several innovative e-commerce-plus-brick-and-mortar strategies.

“I’m impressed by the strategy Sears is pursuing to transform itself,” says Abe Garver, managing director at BG Strategic Advisors. “Instead of the traditional store network model, I’m seeing something akin to a Southwest Airline Rapid Rewards meets Amazon, meets Target.”

And Don Ingham, director at Tenth Avenue Holdings and portfolio manager of the TAH Core Fund, which have investments in Sears, says the retailer is doing the hard work of shifting its massive brick-and-mortar presence in the U.S. and Canada to e-commerce and well-performing stores. While it may have looked good to some investors and observers for Sears to invest in stores, Ingham says, the smart move has been to concentrate on e-commerce and slowly but surely decide which stores needed to close.

“If they didn’t invest heavily online and invested more in the stores, sales and profits would have looked better,” Ingham told Retail Dive, “but they would still be irrelevant because it would have been a waste of money.”