By  on January 28, 2005

NEW YORK — In its last earnings report as Sears, Roebuck & Co., the retailer posted an 86.2 percent drop in fourth-quarter income. Chief executive officer Alan Lacy highlighted an off-mall strategy even as the possibility of a second bidder for the company emerged.

The acquisition of Sears by Kmart Holding Corp., slated to be done in March, could be complicated with another bidder, which one analyst believes to be Vornado Realty Trust.

A regulatory filing by the real estate investment trust, in which it plans to issue up to $2.5 billion in equity and $5 billion in debt, gave rise to speculation Thursday that the REIT might make a run to outbid Kmart’s $11 billion offer for Sears.

Sears did not address the possibility of Vornado as a second bidder, and the firm could not be reached for comment.

On a conference call with investors, chairman and ceo Lacy focused on quarterly results, which showed softness in the apparel segment. Lacy also said the retailer was “looking for strong, national brands to supplement its private label [apparel] brands.”

“While our apparel sales were disappointing in 2004, I am confident that the business is on the right track,” Lacy said on the call. “We have made significant strides in improving the quality and fashion content of our apparel offerings and we remain focused on further enhancing our assortment through the broader rollout of our exclusive A line and Structure brands this spring.”

Regarding a second bidder, Prudential Equity Group retail analyst Wayne Hood wrote in a report that Vornado’s regulatory filing raises the issue that “Vornado could be positioning itself, perhaps with a partner, to make a second bid for Sears.” Vornado already owns 4 percent of Sears. The retailer is expected to receive antitrust approval for the proposed deal with Kmart midnight Thursday.

Meanwhile, for the three months ended Jan. 1, Sears’ income was $378 million, or $1.76 a diluted share, compared with $2.75 billion, or $10.84, in the same year-ago quarter. Last year’s results included gains from the sale of its domestic credit card and tire and battery businesses. The earnings per share of $1.76 beat the consensus among Wall Street analysts of $1.66. Part of the gain came from cost-cutting initiatives, and in part from a lower-than-expected tax rate.

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