Sears Holdings' third-quarter profit was down sharply from the combined showing a year ago of Kmart and Sears, Roebuck and Co., its two main components.
CHICAGO — Sears Holdings Corp. posted a $58 million third-quarter profit Tuesday that topped Wall Street’s expectations but was down sharply from the combined showing a year ago of Kmart and Sears, Roebuck and Co., its two main components.
Despite extending its lengthy sales slump, with comparable sales declining significantly at both Sears and Kmart stores, the retailer’s stock rose more than 4 percent in heavy trading based on the better-than-expected earnings.
Net earnings for the three months ended Oct. 29 were $58 million, or 35 cents per share, down from $150 million, or 93 cents, for Sears and Kmart combined a year ago. Kmart acquired Sears, Roebuck and Co. earlier this year for $12.3 billion and renamed the enlarged retailer Sears Holdings.
Analysts surveyed by Thomson Financial had expected the Hoffman Estates, Ill.-based company to earn 28 cents per share.
Adjusting for the effects of the merger and excluding certain items such as large 2004 gains on the sale of assets, the company said its earnings would have improved to $426 million from $396 million a year earlier.
Most Read Stories
- Slain Tacoma police officer sacrificed himself to save partner, shooter’s wife, witness says VIEW
- Snow is on way to Western Washington lowlands, weather service says
- Why longtime Washingtonians are leaving the Seattle area
- 3 new homeless-encampment sites announced by Seattle Mayor Ed Murray
- FAA orders Boeing 787 safety fix: Reboot power once in a while
Revenue was $12.2 billion, well below the $12.9 billion estimated by analysts and down from $12.8 billion for the two companies in the same period a year ago.
Same-store or comparable sales, the most-used barometer to gauge retail results, were down 2.8 percent at Kmart stores despite what the company said was an increase in apparel and dropped 10.8 percent at Sears.
“While we have made some progress in our operating performance, we need to continue making the changes necessary to drive even more significant improvement,” said Chairman Edward Lampert, who eschews the traditional conference calls with analysts and investors, in a letter to shareholders.
Lampert, who engineered the acquisitions of Kmart and then Sears, dismissed continuing criticism by “so-called experts” and “vocal doubters” about the company’s retail struggles.
“I am pleased with the progress we are making at Sears Holdings,” he said. “We are hiring great people, creating a winning culture and focusing relentlessly on profitability. … We will continue to get better, which also entails recognizing the mistakes we make and correcting them.”
The company announced a shake-up of its merchandising divisions a day earlier and said its apparel chief, Gwen Manto, has left the company, replaced by Peter Whitsett, who had been Kmart’s merchandising officer. Lampert called the apparel results in Sears stores disappointing and said changes will be made by spring to adjust to customer preferences.
He also strongly endorsed the company’s Lands’ End unit, which some experts had said could be sold, calling it a world-class brand that is being embraced by customers in early results from its new display format inside Sears stores. The unit markets most of its products through catalogs.
“While one can’t get too excited about double-digit negative comps (comparable sales), results were better than expected,” analyst Gary Balter said in a research note for Credit Suisse First Boston.
George Rosenbaum, chairman of Leo J. Shapiro and Associates, a Chicago-based retail consulting firm, called the results encouraging because of the improved showing in apparel and overall at Kmart stores. “They are beginning to stabilize and probably are beginning to turn around with the infusion of Sears merchandise,” he said.
Analyst Dan Hess was more negative, saying the company may have made changes to improve its financial operations but hasn’t done a lot to improve the merchandise or the shopping environment in its stores.
“The biggest challenge in front of them is to find a way to compete in a world that has Wal-Mart and Home Depot and Lowe’s,” said Hess, founder and CEO of Merchant Forecast, a New York-based research firm. “Until they do, it’s hard to believe this company is going to survive as a retailer long-term. They have to find a way to reach customers.”
Sears had restructuring charges of $59 million in the quarter, including $53 million from the layoff of 1,200 employees at Sears Canada and $6 million for continuing employee-related costs stemming from the integration of Kmart and Sears.
Sears owns approximately 2,300 full-line and 1,200 specialty retail stores in the United States and owns 54 percent of Sears Canada Inc., a 370-store operation in that country. The company said Monday it intends to spend $720 million to acquire the remaining 46 percent of Sears Canada.
Sears Holdings shares rose $5.49, or 4.7 percent, to $122.20 in late morning trading on the Nasdaq Stock Market. They remained down more than 25 percent from their July peak of $163.50.