NEW YORK — A month away from Black Friday, and the holidays are already looking gloomy for Sears, Roebuck & Co.
After swinging to both third-quarter and nine-month losses, Sears lowered its fourth-quarter sales and margin estimates — thereby reducing its full-year earnings forecast by almost half — saying it has a “more cautious holiday outlook.”
The company said its conservative guidance stems from the below-plan sales and margin results in the previous two quarters. But examining prior results shows that Sears has struggled since the first quarter of this year to achieve appreciable sales and earnings results.
And while the company had highlighted apparel inventory and merchandising problems as a main source of weakness earlier in the year, sales are now struggling in nearly every category.
In the most recent quarter, the Hoffman Estates, Ill.-based national chain said soft sales drove increased markdowns and promotions in its apparel and home divisions. In the period ended Oct. 2, Sears posted a loss of $61 million, or 29 cents a share, compared with earnings of $147 million, or 52 cents, in the year-earlier period.
Third-quarter 2003 earnings include results of the company’s National Tire & Battery and credit card divisions, both now divested, and a pretax charge of $141 million from a repositioning of The Great Indoors division.
Total revenues in the latest quarter dropped 15.3 percent to $8.3 billion from $9.8 billion last year. Wall Street analysts were calling for a profit of 1 cent on revenues of $8.33 billion. Included in revenues were a 2.4 percent decline in sales and services and a 0.5 percent dip in revenues from credit and financial products.
“Overall, I am disappointed with our results,” said Alan Lacy, chief executive officer of Sears, on a conference call. Besides deeper markdown rates, Lacy cited the “challenging macroeconomic environment, less-than-favorable weather conditions for much of the quarter, the disruption caused by business resets and product transitions completed during the quarter, followed by a slower-than-expected ramp-up of sales.”
Lacy said Sears initiated a review of its business plans for the rest of the year. In addition, the company has initiatives in merchandising, gross margin improvements, productivity and capital expenditures under way to improve long-term performance.
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