Sears Earnings Decline 5.4% in 2nd Quarter

Sears, Roebuck & Co., the nation’s largest retailer and a financial services conglomerate, on Tuesday reported a 5.4% drop in its second-quarter earnings despite higher revenue for the period.

Sales at Sears stores advanced 7% over a year ago, compared to revenue gains of more than 10% in each of the company’s three other major operating units, Sears said in a statement.

Sears reported net income of $369.4 million for the three months ended June 30, compared to $390.4 million for the same period a year ago.

Revenue rose 10.8% to $12.98 billion from $11.72 billion a year earlier.

The Sears Merchandise Group, which includes the more than 800 Sears department stores, had second-quarter revenue of $7.2 billion, compared to $6.7 billion a year ago.

Income from the stores group rose 10.5% to $188.8 million but the results included a gain of $31 million from an accounting change. Excluding that gain, income from the Sears Merchandise Group fell $13 million from the $170.8 million reported for the second quarter of 1987.

“The merchandise group continues to perform quite badly,” said Edward Weller, a retail industry analyst with Montgomery Securities Inc. in San Francisco.

Weller said the merchandise division performed sluggishly despite “adjustments and realignments,” including moves into specialty retailing via Sears’ recent purchases of the Pinstripe Petites and Western Auto chains.

In March, Sears announced that it was restructuring the management of its merchandising sector to make the unit more profitable and more responsive to changing consumer tastes.

Second-quarter revenue from the Allstate Insurance Group rose 17.5% to $4.5 billion while income from the unit fell 17.5% to $206.6 million. Sears blamed the income decline on an accounting change and an increase in claims.

The Dean Witter Financial Services Group, which includes the Discover card, had quarterly revenue of $1.05 billion, up 11.2% from 1987. Income from the unit fell 51% to $15.1 million. Sears said the year-ago income figure of $31 million included a $58-million gain from the sale of Sears Savings Bank branch offices.

Sears reported a $100,000 profit for the Discover credit card operation, marking the second consecutive profitable quarter for the card after two years of losses.