SEARS FIRST-QUARTER PROFITS UP 20%
Byline: Jennifer L. Brady
NEW YORK — Propelled by vigorous sales of women’s sportswear and dresses, Sears, Roebuck & Co.’s first-quarter profits before special items grew 20 percent to $180 million, or 45 cents a share, the company said Thursday.
Sales rose 9.6 percent to $8.76 billion from $7.99 billion.
In the year-ago quarter, profits totaled $151 million, or 36 cents.
After a $38 million accounting gain and a $36 million loss on the sale of its controlling interest in Sears Mexico, the company’s earnings came to $182 million, or 46 cents, for the three months ended March 29. As noted, Sears has agreed to sell its 60 percent stake in Sears Mexico for $103 million to Grupo Carso, a diversified holding company based in Mexico City.
“Sears’ strong first-quarter results were boosted by solid increases across all our apparel lines,” said Arthur C. Martinez, chairman and chief executive officer, in a statement. “Especially strong sales were recorded in women’s sportswear and dresses, children’s apparel and footwear.”
Although Sears had solid quarter figures, the company’s credit card goof weighs heavy on the outlook for the longer term. As reported, Sears said it made a “flawed legal judgment” by not filing reaffirmation agreements with the court for all of its bankrupt Sears credit card holders, as required by bankruptcy law. In a reaffirmation, a debtor agrees to repay and again become legally liable for the debt.
The retailer has filed a nationwide plan to repay those credit card customers all money collected on unfiled reaffirmations, with interest, from 1992 through April 1, 1997. In addition, a number of shareholder suits have been filed against Sears on the credit card issue, and on Thursday, the U.S. Attorney’s office in Boston filed for an injunction, which Sears accepted.
Noting that the first-quarter profit topped his estimate of 43 cents, Peter Schaeffer, retail analyst at Dillon, Read & Co., said, “Generally, they were good numbers, but I think everyone is concerned about this restitution issue, and I think that is why the stock is down.”
Sears’ stock lost 2 to close at 46 3/4 on the New York Stock Exchange Thursday. Schaeffer is keeping his full-year earnings estimate at $3.60 until Sears determines what kind of impact the credit card problem will have on its bottom line. He further noted that first-quarter comparable-store sales of apparel were up in the single digits.
Sears’ domestic net income after special items grew 37.8 percent to $227 million, as domestic revenue climbed 9.8 percent to $8 billion.
U.S. merchandise sales and services revenue gained 9.4 percent, lifted by a 2.5 percent rise in comps and a 12.3 percent leap in credit revenues. International operations, including merchandising and credit businesses in Canada and Mexico, lost $45 million after the loss on Sears Mexico.