NEW YORK — As Sears Holdings Corp. nears the first anniversary of its founding, its chairman Edward Lampert left no doubt about his intentions for the retailer.
“I view Sears Holdings as a $55 billion-revenue, 350,000-person start-up — and I continue to believe that we have the challenges, excitement, pace of change and opportunity for success that characterize a start-up,” Lampert said Wednesday in his letter to shareholders, which also noted Sears Holdings’ fourth-quarter and full-year results.
Wall Street liked what it heard. Sears stock closed at $132.29, up $15.02, or 12.8 percent, in Nasdaq trading.
“We will not be bound by the dictates of past practices,” Lampert said. Instead, we will question, test, evaluate and change.”
Part of those changes include transforming certain Kmart locations into a Sears format, and changing the name of those stores from Sears Essentials to Sears Grand. The retailer is also looking for ways to bring Sears merchandise to the Kmart format.
“While we are absolutely focused on profitability, we believe that in order to achieve that objective, we should strive to return Sears and Kmart to the position of prominence that both brands and companies held in American retailing,” wrote Lampert. “Our strong association with customers and our reputation for reliability are attributable in significant part to our great brands, such as Kenmore, Craftsman, Lands’ End and Die-Hard (as well as the Sears and Kmart brands themselves). We are proud of these brands, which have justly earned their status as symbols of excellence and quality.”
Now that Sears Holdings will be a year old on March 24, Lampert wrote it was no longer necessary for him to write to shareholders quarterly, and the chairman will likely reduce the frequency of his letters to once a year.
The retailer posted fourth-quarter earnings that beat analysts’ expectations, and which more than doubled from a year ago due to the combined results from both the Kmart and Sears businesses. The results do not accurately reflect the company’s operations because they only include Sears’ numbers from March 25 forward, after the merger date.
The holding company said income in the fourth quarter ended Jan. 28 rose to $648 million, or $4.03 a diluted share, from $309 million, or $3.09 a share, in the year-ago quarter. Wall Street’s consensus earnings per share estimate was $3.62, according to Thomson Financial. Revenues rose to $16.09 billion from $5.95 billion. Same-store sales at Kmart rose 0.9 percent, reflecting an increase for the first time since the second quarter of 2001, while comps at Sears’ domestic stores fell by 6.1 percent. On a pro forma basis, income a year ago would have been $589 million, or $3.62 a diluted share, on revenues of $16.84 billion.
This story first appeared in the March 16, 2006 issue of WWD. Subscribe Today.
For the year, income dropped to $858 million, or $5.59 a diluted share, from $1.11 billion, or $11 a share, in the same year-ago period. Revenue climbed to $49.12 billion from $19.84 billion. On a pro forma basis as if the companies had merged at the beginning of fiscal 2004, income would have declined to $789 million, or $4.85 a diluted share, from $884 million, or $5.40, while revenues would have dipped to $54.26 billion from $55.97 billion.
Separately, Sears said that director Michael A. Miles and former Kmart president and ceo Julian C. Day have decided not to stand for reelection to the board when their terms end in April. Sears will reduce the size of its board from 11 to nine members.