Hoffman Estates, IL, Oct. 16--Sears, Roebuck and Co. posted higher same-store
sales for the first time in more than two years, but third-quarter profits fell 22 percent on a whopping cost to overhaul its Great Indoors home decor stores.
Net earnings for the three months ended Sept. 27 totaled $147 million, or 52 cents a share, down from $189 million, or 59 cents a share, for the same period in 2002.
Results included a charge of $89 million, or 32 cents a share, to close three underperforming Great Indoors stores and convert a fourth to an outlet store. That left operating earnings at 84 cents
per share, 2 cents better than the consensus estimate of analysts surveyed by Thomson First Call.
Total revenues were $9.79 billion, up from $9.67 billion a year earlier, and retail revenues climbed 1.1 percent to $7.3 billion.
More significantly, the Hoffman Estates, Ill.-based company enjoyed its first increase in sales from established stores in 10 quarters a 1.2 percent gain attributed in part to stronger home appliance sales and an improving economy.
Some analysts had expected a larger jump in same-store sales, while others questioned the 1 percent decline in the domestic gross margin rate. CEO Alan Lacy told them on a conference call that Sears began the quarter with too much inventory, and as a result
was forced to make steeper markdowns than expected.
Sears shares declined $2.61 to close at $48.80 on the New York Stock Exchange, a day after reaching a 15-month high.
"The fact that they've managed to report growing same-store sales for a couple of months now is a pretty positive sign," said Morningstar analyst Heather Brilliant. "But I think people were hoping that the two-year restructuring would lead to a little more
oomph in sales and margins."
The modest sales improvement comes at a critical time, with Sears betting its future on retail after agreeing to sell its
credit unit to Citigroup in July for $3 billion cash.
"We are pleased with our return to sales growth following twoyears of a fundamental repositioning and restructuring of our core business," Lacy said. "While we have much still to do, we believe the business is well-positioned for profitable growth."
He cited an improvement in overall sales trends and singled out strong performances from lawn and garden products and home
appliances, along with progress from the company's new Lands' End and Covington brands.
For the first nine months, net earnings were $648 million, or $2.17 per share, compared with $528 million, or $1.64 per share, in
2002. Revenues were $28.87 billion, virtually flat compared with $28.85 billion a year earlier.
