Sears Posts 1st Loss Since 1933
Sears, Roebuck & Co. reported its first loss in nearly 60 years Thursday, racking up $833.7 million in red ink during the third quarter after a huge rise in claims for hurricane damage and a costly auto-repair scandal.
The company’s performance was also hurt by a $20.5-million write-off of its minority investment in the Phar-Mor Inc. drugstore chain, which filed for Chapter 11 bankruptcy protection in August.
The overall loss, which investors had largely anticipated, masked a strong performance by the Dean Witter Financial Services Group.
The company said it has not recorded a loss since the depths of the Great Depression in 1933, when it was $2.5 million in the red for the year. At the time, it only reported on an annual basis.
Sears stock was down 50 cents a share to $41.625 in late New York Stock Exchange trading.
Chairman Edward A. Brennan said in a statement that he was encouraged by recent retail sales trends. Arthur C. Martinez, hired in August to head the merchandise group, said Sears’ store-within-a-store “power formats” were working.
The third-quarter loss equaled $2.25 a share and contrasted with a profit of $229.2 million, or 67 cents a share, a year earlier. Revenue for the three months ended Sept. 30 edged higher to $14.49 billion from $14.3 billion.
The overall results included an after-tax charge of $20.5 million for a write-off of the Phar-Mor investment. Sears owns less than 5% of Phar-Mor’s stock.
Allstate lost $840.2 million, contrasted with a $158.2-million profit a year earlier, mainly because of claims for damage from hurricanes Andrew and Iniki that amounted to $1.25 billion after taxes. Allstate revenue grew 2.1% to $5.07 billion.
The merchandise group lost $36.4 million in the quarter, contrasted with a profit of $54.4 million in the third quarter of 1991.
Brennan said automotive sales dropped about $80 million amid charges in California and New Jersey that Sears Auto Centers recommended or performed unnecessary work on cars.
The company did not provide year-ago automotive revenue but said automotive sales have been down 10% to 15% since the charges were aired.
The merchandise group also took a $27-million after-tax charge for costs of settling the charges.
Brennan said he was pleased by a 0.7% increase in retailing revenue to $7.71 billion from $7.66 billion.
Analyst Richard Nelson, of Duff & Phelps Inc. in Chicago, said sales at stores open a year or more rose 2.4%, which he called a “respectable” performance.
Analyst John Landschulz of Howe Barnes Investments in Chicago said Sears was straining to hasten the improvement of its retailing business.
“Hurricane Andrew took away a nice earnings cushion, so there is an enormous amount of pressure to shape things up,” he said.
Dean Witter’s profit rose 24.1% to $114.3 million, from $92.1 million. Revenue climbed 3.6% to $1.30 billion.
Sears said last month that it will divest itself of Dean Witter, along with its Coldwell Banker residential real estate business, by the end of next year to focus on its retailing and Allstate insurance operations.
Coldwell Banker profit rose to $20.2 million, up from $5.5 million last year, mainly because of the sale of a partial interest in a shopping mall held by the unit’s Homart commercial property division.
