VOL. 124 | NO. 40 | Friday, February 27, 2009
Sears Q4 Profit Falls 55 Percent on Charges
By ASHLEY M. HEHER | AP Retail Writer
CHICAGO (AP) - Struggling retailer Sears Holdings Corp. said Thursday its fourth-quarter profit dropped by more than half as charges for store closings, valuation declines and severance dragged down results.
Still, adjusted results for the owner of Kmart and Sears stores beat Wall Street estimates and sent the company's stock up 8 percent.
Chairman Edward Lampert, who acquired Kmart in 2003 and Sears, Roebuck and Co. in 2005, told investors in his long-awaited annual letter that the company's cautious approach to investing capital in stores and closing unprofitable locations – including 24 last month – while paying down debt has helped the chain.
"I believe that we are well-positioned now at Sears Holdings to operate through a difficult economy, and we are preparing to rebound strongly when the economy stabilizes and turns back up," Lampert wrote in the long and sometimes philosophical public letter. "In the future, there will be many opportunities for us and we intend to seize them."
For the three months ending Jan. 31, the Hoffman Estates-based company earned $190 million, or $1.55 per share. That's down from $426 million, or $3.17 per share, during the same period last year.
Excluding the impact of charges at its Orchard Supply Hardware subsidiary, severance and store closings as well as gains from taxes, investments and debt repurchases, the retailer earned $360 million, or $2.94 per share.
That's well ahead the $2.68 per share profit analysts surveyed by Thomson Reuters expected.
Sales fell 12 percent to $13.28 billion, from $15.07 billion a year ago and below analysts' forecast for $13.99 billion. Same-store sales – an important retail industry metric of sales in stores open at least a year – sank 8.3 percent.
Sears' domestic same-store sales dropped 11 percent and Kmart's same-store sales slipped 5 percent, helped by the discount store's lower prices and the promotion of a popular layaway program for holiday shopping.
The retailer blamed its same-store sales declines on the prolonged housing downturn, which particularly hurt home appliance sales at its domestic Sears locations. It also cited a pullback in consumer spending brought on by the recession, which hurt home, household goods and apparel sales at Sears and Kmart stores as well as lawn and garden sales at Sears stores.
"Fiscal 2008 was a very difficult year for the U.S. economy, and its effect on consumer confidence reflects the turmoil that has enveloped the retail industry and our business," interim Chief Executive and President W. Bruce Johnson said in a statement. "We maintained our focus on providing great product and service value to our customers, many of whom feel the impact of lower incomes and tighter credit."
Full-year net income plunged 94 percent to $53 million, or 42 cents per share, from $826 million, or $5.70 per share, in the previous year. Revenue slipped 8 percent to $46.77 billion from $50.7 billion.
Same-store sales for fiscal 2008 dropped 8 percent, while Sears domestic same-store sales fell 9.5 percent and Kmart same-store sales declined 6.1 percent.
Sears has about 3,800 full-line and specialty retail stores in the U.S. and Canada.
Sears shares rose $2.88 to $38.71 in morning trading Thursday.
AP Retail Writer Michelle Chapman in New York contributed to this report.
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