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NEW YORK — Sears Holdings Corp. is building up a big cash cache, as well as fatter profits, despite softer sales.
The company said Wednesday that it expects to end its fiscal year ending Feb. 3 with $3.5 billion in cash and cash equivalents. And while same-store sales for both its Kmart and Sears domestic units fell during the nine-week period ended Dec. 30, the retailer still expects fourth-quarter net income to beat year-ago results.
Wall Street cheered the news, sending shares of Sears up $5.86 percent to close at $172.09. Investors digested the company’s growing cash hoard, and expect the buildup means Sears Holdings chairman Edward Lampert is planning an acquisition.
The retailer said Kmart comps fell 1.2 percent due to lower transaction volume, although apparel sales increased over the prior year. Sales at Sears domestic stores fell by 5.6 percent, reflecting lower lawn and garden and appliance sales that were partially offset by an improvement in women’s apparel.
Sears expects fourth-quarter net income for the year ending Feb. 3 to be between $750 million and $830 million, or between $4.87 and $5.39 a diluted share. This compares with year-ago net income of $648 million, or $4.03 a diluted share, in the prior period. The company said it also expects to post a $20 million pretax gain from property sales and losses related to total return swap investing, or more generically derivative transactions. It was the same type of derivative transaction that provided the retailer with a gain of $101 million in the third quarter.
For the year, Sears expects net income to be between $1.42 billion and $1.5 billion, or $9.12 to $9.63 a diluted share. The fiscal year is a 53-week period, compared with last year’s 52 weeks.
This story first appeared in the January 11, 2007 issue of WWD. Subscribe Today.