Sears Says Profit Will Beat Forecasts by 50%

Sears, Roebuck & Co. estimated Wednesday that first-quarter profit will beat the Wall Street consensus forecast by more than 50% after savings from job cuts and other restructuring activities bolstered its retail earnings.

The news drove shares of the No. 4 U.S. retailer to their highest level since July 1998.

The shares ended the trading session up $2.98, or 5.8%, at $54.18 on the New York Stock Exchange.

Sears said it expects first-quarter earnings of 93 cents a share before special items, up from 45 cents a year earlier. Estimates from eight analysts polled by Thomson Financial/First Call averaged 61 cents a share.

Sears said first-quarter operating earnings in its retail business were up $104 million from a year earlier.

It also said it expects a 20% increase in earnings from its credit business.

“All of our businesses did well in the first quarter,” Chief Executive Alan Lacy said.

In October, Sears announced a broad three-year restructuring for its 860 department stores. The plan included cutting 4,900 salaried jobs, trimming unprofitable product lines and overhauling its apparel business.

Sears also made plans in January to cut about 3,600 field positions, eliminating three to five jobs in each of its department stores.

In the latest quarter, Sears expects to take a noncash charge of 64 cents a share for an accounting change, an 18-cent gain from the sale of an investment in Advance Auto Parts and a 13-cent charge related to Sears Canada’s plan to convert Eaton stores.

Including those items, Sears said it expects first-quarter earnings of 34 cents a share, down from 53 cents a year earlier.

Sears also raised its forecast for full-year profit growth to 17% from a previous outlook of 13% to 15%. The company earned $4.22 a share in 2001.

Sales at domestic stores open at least a year fell 4.7% in March from a year earlier, Sears said. It had forecast a low single-digit decline on a percentage basis. Total sales in March fell 1.8% to $2.52 billion.

Kurt Barnard, president of Barnard’s Retail Consulting Group, said investors should not worry about the sluggish sales growth. “They are very much on the right track,” he said.