Sears sees 4Q profits grow by 12%

By Staff -- Home Textiles Today, 1/21/2002 12:00:00 AM

Hoffman Estates, IL — In a second quarter of improved earnings, and rebounding from losses earlier in the year, Sears, Roebuck and Co., the nation's fourth-largest retailer, recorded a fourth-quarter profit of $494 million, up 11.8 percent from $442 million the prior year.

Firming up the bottom line, in spite of lower sales, the retailer bulked up margins, whittled down costs and shucked off a fistful of one-time charges, totaling $163 million, that weighed down last year's bottom line as the retailer shut down stores and settled a law suit.

Excluding all the one-time items that obscure the bottom line both this year and last, the retailer posted a profit of $657 million, up 7.9 percent from the prior year.

Still acting as a big drag on profits, Sears recorded a $415 million provision for uncollectible accounts in its big credit card business as consumers defaulted on their debt. This year's bad-debt provision was up more than 85 percent, from $224 million a year ago.

In spite of strong gains in its credit and financial products unit, overall sales slipped by 1.1 percent, to $12.2 billion from $12.4 billion a year ago. Sliding even further in a sluggish retail economy, merchandise sales and services fell by 3.6 percent, to $10.8 billion from $11.2 billion. Still going strong as consumers continue to add to their household debt, Sears' credit and financial services business jumped up by 24.1 percent, to $1.4 billion from $1.1 billion the preceding year.

"Despite slow holiday sales, our retail and related services profits increased solidly, driven by margin rate improvements across virtually all of our retail formats," said Alan Lacy, chairman and ceo.

Average gross margin, calculated on merchandise sales and services, widened by 30 basis points, to 28.0 percent from 27.7 percent the prior year. At the same time, costs were modestly pared, by 10 basis points, to 22.2 percent from 22.3 percent.

Going forward, Lacy forecast that Sears' earnings per share will climb by 13 percent to 15 percent. "We anticipate that our retail and related services business will grow operating income at a low double-digit rate, and credit and financial products will grow at a mid single-digit rate," he said. Further boosting profits, said Lacy, Sears Canada "should post improved profitability," and cost-cutting and productivity programs are expected to kick in.