Sears profit drops 40% on lower sale

Sears profit drops 40% on lower sales
By James P. Miller
Copyright © 2007, Chicago Tribune
8:15 AM CDT, August 30, 2007


Sears Holdings Corp. reported fiscal second-quarter earnings that were down 40 percent, reflecting softer results from the Chicago retail company's Kmart and domestic Sears operations.

For the quarter ended Aug. 4, Sears had net income of $176 million, or $1.17 a diluted share, off from the year-ago period's $294 million, or $1.88 a share.

The year-ago quarter got some help from a net $22 million special gain that boosted per-share earnings by 14 cents; excluding that gain, per-share earnings last year would have been $1.74.

The earnings were roughly in line with guidance Sears had recently provided. Still, Chief Executive Officer Aylwin Lewis said the company is "disappointed with our second quarter results."

Profit margins came under pressure because sales declined 4 percent to $12.24 billion from $12.79 billion, he noted, and because Sears increased its promotional pricing to move product off the shelves.

"In response," Aylwin said, Sears will be "enhancing our marketing message to more clearly articulate the advantages of our products and services."

Sears noted that in its U.S. Sears stores, sales at stores open at least twelve months (known as "comparable-store sales) declined 4.3 percent, in part because the falloff in the U.S. housing market has hurt sales of the retailer's key appliance segment.

At the parent company's Kmart unit, comparable-store sales dropped 3.8 percent. Sales at the company's Sears Canada unit improved, however.

Sears noted that it spent a hefty $1.5 billion to buy back 9.6 million shares during the latest quarter. It also noted that, as the company disclosed on Aug. 13, directors have approved the expenditure of an additional $1.5 billion to repurchase more shares. As of Aug. 24, Sears said it had $1.4 billion remaining under that authorization.