By  on March 2, 2007

Sears Holdings Corp. said Thursday that fourth-quarter earnings jumped 26.5 percent, beating the consensus earnings per share estimate by 15 cents.

Results got a boost from better margins in apparel sales at Kmart and Sears domestic stores.

For the three months ended Feb. 3, net income climbed to $820 million, or $5.33 a diluted share, from $648 million, or $4.03, in the year-ago quarter. Wall Street analysts' consensus estimate was $5.18 a share. Revenues rose 1.3 percent, to $16.29 billion from $16.09 billion. Same-store sales fell 3.1 percent as comps declined 4.9 percent at Sears domestic stores and 0.9 percent at Kmart stores.

The company said improved results reflected increased operating income at Kmart and Sears domestic stores, driven by an improved margin rate performance, particularly in apparel.

For the year, net income leapt 73.7 percent, to $1.49 billion, or $9.57 a diluted share, from $858 million, or $5.59, in 2005. Revenues rose 7.9 percent, to $53 billion from $49.1 billion.

Edward S. Lampert, in his annual letter to shareholders, wrote, "Lands' End had a record year in profitability in its traditional business (i.e., catalogue, online and inlet stores). In addition, we saw a significant improvement in the profit performance of Lands' End merchandise in our Sears stores. With a new leadership team and a more integrated approach to working across Sears Holdings, the business is moving in the right direction."

The chairman also pointed to overall improvement in the apparel businesses at both Kmart and Sears. "Kmart is further along in partnering with our sourcing and design groups, and we believe that we have improved our offering for our customers with higher quality, better fit and appropriate fashion at great value. Sears apparel has turned around the decline that occurred in 2005 when it moved away from the styles our customers wanted to buy. The team has made significant progress this year, and is focused on creating the kind of breakthrough improvement that would return Sears to its previous levels of profitability in this area," he wrote.

Aylwin Lewis, chief executive officer and president, said in a statement that the strategic actions taken in 2006 would provide opportunities for the company in 2007. He noted, "Our improved apparel results are an indication of what can happen when we enhance our offerings and services to better meet customers' needs."

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