CHARGES PUT SEARS LOSS CLOSE TO $200M
Byline: Evan Clark
NEW YORK — Sears, Roebuck & Co. digested gargantuan charges with an almost $200 million second-quarter loss, but chairman and chief executive officer Alan Lacy said the master plan to turn around the chain will be revealed in October.
The Hoffman Estates, Ill.-based national chain also said it expects same-store sales to be flat to slightly down for the rest of the year.
Including charges, the net loss for the period ended June 30 totaled $197 million, or 60 cents a diluted share, against earnings of $388 million, or $1.11, in the year-ago period. As expected, the firm recorded extraordinary items of $809 million — $513 million, or $1.56 a share, after taxes — for a change in accounting standards, the shuttering of its skin care and color cosmetic businesses and closure of the HomeLife Furniture Corp. The company realized a $23 million non-recurring gain in the year-ago period. Excluding extraordinary items, earnings dropped 13.4 percent, to $316 million, or 96 cents a share, in line with the firm’s previously revised projections.
Net revenues for the quarter ended July 1 inched up 1.8 percent, to $10.23 billion from $10.05 billion a year ago. Revenues from merchandise sales and services dipped 0.3 percent to $8.88 billion, while revenues from credit operations jumped 18.1 percent, to $1.35 billion. Shares of Sears dropped 15 cents to close at $46.45 Wednesday on the New York Stock Exchange.
Lacy noted in a statement that chills in both the economic environment and the weather squeezed the hardlines and softlines businesses in the full-line stores. “In softlines, sales increases in footwear were offset by lower-than-anticipated results among the other softlines categories,” he said.
Sears’s exit of the skin care and color cosmetics businesses earlier this month was merely a prelude to other fundamental changes in the firm’s retail strategy.
Referring to its cosmetics retreat, Lacy cautioned: “We will, no doubt, have more decisions of this kind to make.” He plans to offer his broader plans for Sears at an October analyst meeting. “We’re probably going to be a little less of a department store, particularly in our softlines offering,” he said. While major changes in apparel could be on the horizon, he noted, “having a successful apparel business is absolutely essential for us.” Moving toward an off-mall retail approach will make Sears more competitive with stores like Wal-Mart and Target and more differentiated from its in-mall competitors like J.C. Penney Co.
“We just need to make a lot more money in the full-line store,” Lacy concluded.
Equity analyst Mark Picard, with Lazard Freres & Co., said that despite the lack of detail given by Lacy on the shape of the restructuring, some of the prospects, such as narrowing merchandise assortments, “sound very interesting” and offer parallels to the Kohl’s retail model. He noted that the firm appears to moving in a direction where it will improve the shopping experience and recognize “you don’t have to be everything to everyone.”
Net loss for the half totaled $21 million, or 6 cents a diluted share, compared to earnings of $623 million, or $1.76, a year ago. Revenues rose 0.6 percent, to $19.08 billion, compared to $18.97 billion a year ago. Merchandise sales dropped 0.1 percent, to $16.63 billion, and credit revenues rose 5.3 percent, to $2.45 billion.