Sears Profit Down 15.6% in Third Quarter

Sears, Roebuck & Co. Tuesday said its third-quarter profit fell 15.6%, reflecting a sharp drop in retailing income and a storm of claims filed against Allstate Insurance Co. by victims of Hurricane Hugo.

The claims of more than $250 million represented the largest storm-damage loss in Allstate’s history, Sears said in announcing its quarterly results.

Sears earned $257.5 million in the three months ended Sept. 30, compared to $305 million in the comparable 1988 quarter.

Revenue rose 4.8% to $13.2 billion, the Chicago-based company said.

Income from the Sears Merchandise Group, the nation’s largest retailing operation, plunged 25% to $82.9 million, Sears said.

Revenue from the retailing division edged up 1.3% to $7.6 billion.

Sears attributed the retailing results to a soft market for big-ticket durable goods, such as home appliances, and higher interest costs in the credit segment of the merchandise group.

Two retail analysts expressed differing opinions on whether the performance of the merchandise group indicated that Sears’ “everyday low pricing” strategy is failing.

“My opinion is that they probably have to do more promotion to get the customers in the door,” said Walter Loeb of Morgan Stanley & Co.

But John Landschultz of Cowen & Co. said the results “weren’t bad at all.” The real test of the new retailing strategy will come in the second half of 1990, he said, after Sears finishes reshaping its stores into collections of “super stores,” offering low-cost, brand-name items.

Allstate’s income fell to $126.1 million from $202.7 million, largely as a result of damage claims from Hurricane Hugo, which battered the southeastern U.S. coastline in September.

Allstate spokesman Greg Rossiter said it was “a natural conclusion” that the company would also be hit with a lot of damage claims from the earthquake that struck northern California a week ago.