Sears Swings From Black To Red
By Staff -- Home Textiles Today, 10/25/2004
Hoffman Estates, Ill. —With same-store sales falling off 4 percent, and margins under heavy pressure, Sears, Roebuck and Co. recorded a third quarter loss of $61 million, compared with a year-before profit of $147 million.
Merchandise sales and services dropped 2.4 percent, to $8.2 billion from $8.4 billion
The loss came even though the retailer slashed its operating costs during the third quarter, generating $220 million in year-over-year savings as it put behind it $184 million in costs related to sold-off businesses.
The retailer posted an operating loss of $106 million in its U.S. business during the period, compared with an operating profit of $222 million last year. Prior year results included $369 million in operating income from the sold-off credit business.
Alan Lacy, Sears chairman and CEO, commented, “A number of factors contributed to a disappointing third quarter, including softer retail demand, larger than expected costs associated with seasonal transitions and a slower ramp up of sales following certain business resets.”
An unforgiving Wall Street responded by pounding Sears stock down $2.79 a share, or 7.6 percent, to $34.13 a share, in mid-day trading on Oct. 21.
| Qtr. 10/2 (x000) | 2004 | 2003 | % change |
| Sales | $8,210,000a | $8,409,000a | -2.4 |
| Oper. Income (EBIT) | 19,000 | 635,000b | -97.0 |
| Net income | (61,000)c | 147,000c | — |
| Per share (diluted) | (0.29) | 0.52 | — |
| Average gross margin | 26.2% | 27.0% | — |
| SG&A expenses | 24.5% | 26.5% | — |
| Nine months | |||
| Sales | 24,613,000a | 24,734,000a | -0.5 |
| Oper. Income (EBIT) | 178,000 | 2,027,000b | -91.2 |
| Net income | (867,000)c | 648,000c | — |
| Per share (diluted) | (4.03) | 2.17 | — |
| Average gross margin | 27.0% | 27.2% | — |
| (loss) a - Merchandise sales and services, excluding revenues from the sold-off credit card business. b - Prior-year operating profits included results of the now-divested credit card business. c - Third quarter results include a $16 million provision for uncollectible accounts, down from $567 million last year; a $7 million loss on the company's minority stake in another business, compared with a year-before loss of $6 million; and income-tax expense of $25 million, compared with a prior-year tax benefit of $91 million. The prior-year third quarter included a $112 million special charge. Nine month results include a $43 million provision for uncollectible accounts, compared with $1.5 billion during the same period a year ago; $41 million in special charges vs. $140 million last year; $2 million in income tax expense vs. a year-before tax benefit of $392 million; and a $15 million loss from the company's minority stake in another business, compared with a $16 million loss a year ago. |
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