Sears’ Sales on Soft Side; Stock at 4-Year Low : Retailing: Company warns Wall Street of lower profit for quarter and year and announces reshuffling of top management.
During an otherwise solid August for retailers, Sears, Roebuck & Co. continued to suffer, warning Wall Street on Thursday that flat sales and soft gross margins will mean lower profit for both the quarter and the full year.
Investors reacted by sending Sears’ stock to a four-year low, as the shares lost $3.69 to close at $33.50 on the New York Stock Exchange.
The nation’s No. 2 retailer also announced key changes in management.
As has been the case for most of the year, Sears’ losses meant gains for specialty stores and discount chains.
Higher-end boutique stores once again drew style-conscious customers, with the Talbots Inc. reporting same-store sales growth of more than 18% and the Limited Inc. announcing same-store sales up by 12%.
And discounters in August continued to attract the value customers: Target, a division of Dayton Hudson Corp., said same-store sales were up 6.9% over the same period last year. Wal-Mart Stores Inc., the nation’s largest retailer, also had a strong month, with gains of 8.7%.
That said, some analysts noted a slight slowdown toward the back half of the month, especially compared with the gangbusters pace of the first half of the year. Goldman Sachs reported that the composite index of major retailers it follows posted a 5.1% sales gain over the same period last year; Bank of Tokyo-Mitsubishi pegged its composite at 6.6%.
“We’re going to see a slower rate of increase in consumer spending,” said Thomas Tashjian, a retail analyst at NationsBanc Montgomery Securities in San Francisco. “The holiday [period] will be a kind of average holiday, with a 4.5% to 6.5% increase in retail sales--as a benchmark, the first quarter of this year saw a 9.1% increase in sales.”
Sears shared its poor August sales showing with J.C. Penney Co., which posted a 3.2% decline in stores open at least a year. Penney has joined Sears at the bottom of the heap for most of the year.
In addition to revising its earnings, Sears reshuffled top management. The Hoffman Estates, Ill.-based company said Robert L. Mettler, its president of merchandising, “has chosen to leave the company.”
Under the newly created Office of the Chief Executive, CEO Arthur C. Martinez will share corporate decision-making with two executives, Alan J. Lacy and Julian C. Day.
“The Martinez-Mettler team did a wonderful job of turning [around] this business, from a merchandising point of view, last time,” Tashjian said, referring to the company’s mid-’90s resurgence. “I think Martinez recognizes that there are financial initiatives that have to also be highlighted in the next era of change for the company.”
On Thursday, Sears said profit for the quarter ending Sept. 30 would be 63 to 67 cents a share. Analysts on average had expected 82 cents, according to First Call Corp. Annual earnings, the company said, are likely to be up by “a low-single-digit percentage rate,” as opposed to the 11% gain analysts anticipated, which would have amounted to $3.68 a share.
August sales in stores open at least a year were up 0.1%, Sears said. The company also said it would take an undisclosed charge for the second half of the year to reduce costs.
Same-store sales are considered among the best measures of retail performance because the comparisons exclude new and closed stores.
Martinez has unveiled a series of changes this year, including a shift to more trendy brand-name clothing lines such as Benetton USA and Blue’s Clues for children.
Sears is also reaching out to younger customers, sponsoring a concert tour, timed for back-to-school, by teen pop idols the Backstreet Boys, creating a teenage advisory panel and, beginning this fall, offering Pokemon apparel, accessories and games to capitalize on the video game sensation.
The chain of almost 3,000 department and specialty stores said last month that it is retiring the “Softer Side of Sears” ad campaign that helped revive the company.
Those ads, acknowledging Sears’ reputation as a seller of tools and appliances, invited women to check out something that might surprise them: fashionable apparel.
In their place, Sears unveiled a campaign meant to highlight its value--and bid for the discounters’ customers. Each spot ends with the line “The Good Life at a Great Price. Guaranteed. Sears.”
“They’re obviously having a lot of trouble reinvigorating sales, and when that happens, something has to give in order to generate a good bottom line,” said retail analyst Alan Mak with Argus Research in New York. “Apparel really seems to be a big problem for them, and they don’t have a solution for it. I’m optimistic about their future, but my optimism doesn’t necessarily translate into better business.”
Other retailers’ August sales reports, as compared to the same period a year ago:
* Ann Taylor, +9%.
* Best Buy, +11.1%.
* Gap Inc., +8%.
* Intimate Brands, +17%.
* Gymboree, -19%.
* Dayton Hudson department stores, -2.2%.
