Hoffman Estates, IL, September 8---Sears Holdings, the retailer formed when Kmart bought Sears, reported a 4.5 percent increase in earnings in the second quarter to $161 million from $154 million a year earlier.
Earnings per share were $0.98, off from the $1.72 posted a year earlier. The drop in earnings per share was largely due to an increase in shares outstanding associated with the merger, which was completed in May.
Sales in the quarter were off 2.1 percent on a basis that assumes the merger was completed a year earlier. Same store sales dropped a sharp 7.4 percent, which the company blamed on eliminating some clearance sales.
At Kmart stores, sames store sales were down 0.3 percent.
On a basis that assumes Sears and Kmart had been combined last year instead of in March 2005, earnings rose to $161 million, or $0.98 a share, from $110 million, or $0.67 a share.
The company also said Aylwin Lewis, who had been CEO of Kmart before the merger, would replace Alan Lacy as CEO as of September 30.
Lacy, who will stay on as vice chairman, had faced Wall Street criticism for failing to revive sales at Sears despite years of turnaround efforts.
The company, which is headed by hedge fund manager Edward Lampert, has focused on cutting costs by reducing profit-eroding clearance sales. The company has also closed or sold underperforming stores and cut thousands of jobs.
Sears said it was sticking to its strategy of converting some 400 Kmart stores in the next two or three years to a new format called Sears Essentials, which sells everything from toilet paper to Kenmore appliances.
The company said it had opened 32 Sears Essentials stores as of July 30, and plans to have about 50 open by year end.
The retailer said about 20 of its stores and facilities were damaged by Hurricane Katrina, but it expected insurance to cover the majority of the losses.
