NEW YORK--As other chains stumble, Sears, Roebuck & Co.'s merchandising operation continues to gain ground. On Thursday, Sears reported a 19.2 percent earnings gain on 6.2 percent higher revenues in the third quarter. Sears earned $228 million, or 56 cents a share, compared to $192 million, or 47 cents, in 1994. Revenues were $8.4 billion, up from $7.93 billion. Domestic same-store sales were up 5.4 percent. Earnings were slightly ahead of Wall Street's projection of 55 cents a share. For the fourth quarter, Todd Slater, retail analyst at UBS Securities, is estimating earnings of $1.16 a share compared with 90 cents in the year-ago period. The company said there was strength in soft lines and hard goods with "excellent" apparel sales after cool weather arrived in the back-to-school period. Pressure on margins was more than offset by lower expense ratios. Domestic selling and administrative expenses in the quarter were cut to 22 percent of sales from 23.2 percent through tight controls and leveraging fixed costs on a higher sales base. Domestic gross margins dropped to 26.6 percent from 26.9 percent, reflecting "continued competitive pressure in the retail environment." Slater said women's merchandising changes in Sears' big stores "are paying off." Sears is 70 percent hard lines and 30 percent soft goods. According to a report issued this week by Morgan Stanley, Sears' same-stores sales were up 4.5 percent in September, but comparable-store sales increases in apparel were in the low double-digits, with women's in the high teens and kids in the low teens. Strong results in Sears' credit card business have also helped boost earnings in the quarter, as credit revenues rose 7.6 percent to $970 million. Chairman and chief executive officer Arthur C. Martinez said in a statement that credit operations benefited from growth in receivables. "Credit plays an integral role in supporting all our marketing initiatives," Martinez said. He noted that the business performed well in the quarter and nine months "reflecting the continual revitalization of our mall-based stores and the growth of our various off-the-mall store formats." One dark spot was Sears' merchandising and credit operations in Canada and Mexico, where the loss grew to $7 million in the quarter from $6 million a year ago. In a separate case, Developers Diversified Realty Corp. signed a contract with General Growth Properties to acquire Sears's Homart Community Centers division for $501.5 million. The Community Centers division is part of Sears' Homart Development Co. unit. Sears earlier agreed to sell Homart to General Growth for $1.85 billion in a transaction expected to close in mid-November. The Community Centers division includes 10 shopping centers totaling over 4 million square feet, as well as several pieces of land and all rights to 18 potential shopping center projects in Homart's pipeline.
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