Sears Beats Forecasts; Net Income Climbs 75%

Sears, Roebuck & Co., the largest U.S. department store chain, said Thursday that first-quarter profit rose more than analysts had forecast because of increasing sales of Lands’ End clothing.

Net income climbed 75% to $192 million, or 60 cents a share, from $110 million, or 34 cents, a year earlier, when the retailer had to write down the value of some acquisitions. Sears was forecast to earn 57 cents a share by analysts surveyed by Thomson First Call. Sales fell 1.7% to $8.88 billion.

The introduction of clothing by Lands’ End, acquired by Sears in June, failed to halt a 19-month slide in sales at stores open at least a year. Chief Executive Alan Lacy is counting on Lands’ End to halt the decline while he seeks a buyer for the company’s credit-card business, a strategy that some investors consider risky. Sears expects second-quarter sales to decline.

“Sears is still on the lower end of the consumer totem pole,” said David Abella, an analyst at Rochdale Investment Management, which has about $900 million in assets. The firm sold its Sears shares in October.

Sears bought catalog and Internet retailer Lands’ End for $1.9 billion and now offers the clothing in about half of its 870 stores. The retailer hopes the items will lure customers who buy appliances and tools into its clothing section. The retail and services division had a loss of $23 million as same-store sales declined 6.7%.

Profit from the finance unit, which accounts for almost two-thirds of earnings, fell 11% because Sears had to put aside more funds to cover unpaid bills. Sears put the business up for sale last month. Investor concern about rising credit-card delinquencies sliced about $5 billion in market value from the retailer after it starting increasing reserves in October.

Sears said earnings would be 85 cents to $1 a share in the second quarter and $4.95 to $5.15 a share this year, excluding any costs from selling the finance business. Analysts had forecast profits of $1.18 a share in the quarter and $4.86 for the year.

Sears said in February that first-quarter profit would be 57 cents to 65 cents a share because of the rising credit-card delinquencies. Analysts had forecast profit of 87 cents before the company gave the estimate.

Shares of Hoffman Estates, Ill.-based Sears fell 1 cent, to $26.63, on the New York Stock Exchange. They’ve tumbled 51% in the last year.