Sears’ Profit Falls 37% in 4th Quarter; 9,000 to Be Laid Off
Sears, Roebuck & Co., announcing a 37% drop in fourth-quarter profit Monday, said it would cut an additional 9,000 jobs--the second major round of layoffs in as many months.
The sagging profit reflected a $155-million charge to cover costs of a sweeping program to cut expenses, including a reduction of 30,000 workers by the end of the year. The new layoffs included 1,400 positions in Sears’ historic but money-losing catalogue division, which someanalysts had speculated might be scrapped in an effort to improve the Chicago-based company’s bottom line.
The company said profit for the fourth quarter, which includes the important Christmas shopping season, dropped to $378.8 million from $602.1 million a year ago.
For all of 1990, the company said, it earned $902 million, down from $1.51 billion in 1989.
Payroll cuts are designed to wring out $600 million in before-tax expenses in 1991 and $700 million before taxes in subsequent years, the firm said. “We are committed to the principle that our cost structure will be competitive,” Sears Chairman Edward A. Brennan said in a prepared statement.
Long the undisputed king of retailers, Sears has seen legions of once-loyal customers defect in recent years to aggressive discount chains such as Wal-Mart and Kmart. The company has also been hurt by fuzzy marketing strategies as well as recession.
But analysts said the latest moves stood a good chance of turning things around. “I’m very encouraged,” said Walter F. Loeb, a retail consultant in New York. “It’s a real sincere effort to cut some of the fat out of the company.”
John S. Landschulz, an analyst for Howe Barnes Investments in Chicago, described the cuts as part of a “very bullish” attempt to reduce the size of the bloated company. Landschulz said the lion’s share of the layoffs should be completed by summer, leaving the slimmed-down firm in position to benefit from an expected rebound in retail sales the second half of the year.
Also Monday, Brennan announced the resignation of Michael Bozic as president and chief operating officer of Sears’ 314,000-employee merchandising group, which oversees retail and catalogue operations. Bozic will not be replaced, Brennan said.
Loeb said Bozic’s departure would have little impact on the company since Bozic was stripped of most of his authority months ago and has been little more than a figurehead since.
Last month, Sears announced plans to eliminate 21,000 non-sales jobs by June 1. Monday’s cutbacks would affect mostly administrative personnel.
Some of the catalogue layoffs resulted from the conversion of many small catalogue stores, a familiar site in small towns, to independently owned and operated businesses, the company said.
EARNINGS: D2
