Sears Profit Soars on Unit’s Sale
Sears, Roebuck & Co. on Thursday posted a $2.75-billion profit for the fourth quarter thanks to the sale of its credit card unit to Citigroup Inc., but with retail sales sagging the company lowered its estimate for earnings in the first quarter and all of 2004.
The news sent Sears’ shares down $1.43 to $44.37 on the New York Stock Exchange after initially plunging 9%. They fell $1 more in after-hours trading.
The one-time sale windfall enabled Sears to post its most profitable year, a $3.4-billion gain that topped the previous high of $2.37 billion in 1993. Beyond that, Chief Executive Alan Lacy told analysts, “I am confident the sale will make us a better retailer, as we are now completely focused” on strengthening sales from the retailer’s 870 department stores.
Analysts agree that the lack of distractions from credit should help the struggling company. But the addition of Lands’ End apparel to its stores hasn’t yet produced a turnaround, and same-store sales have been heading steadily lower for more than two years.
Net income for the last three months of 2003 amounted to $10.84 a share. That compared with a profit of $848 million, or $2.67, in the same period of 2002.
Revenue declined 2% to $12.25 billion.
The results included several large one-time items: a pretax gain of $4.1 billion from the sale of the credit business last year, a $791-million pretax charge on the early retirement of debt linked to that sale, and an $81-million pretax gain for the sale of the company’s National Tire & Battery business.
Excluding those items, Sears said earnings per share were $2.24 -- handily beating the $2.02 estimate of analysts surveyed by Thomson First Call. But Wall Street was more focused on Sears’ scaling back of estimates for the current quarter and year, especially in the wake of disappointing fall and holiday sales.
The Hoffman Estates, Ill.-based retailer said it expected first-quarter earnings of 9 to 14 cents a share, with comparable-store sales flat to slightly higher. That’s well short of analysts’ consensus estimate of 20 cents. For the full year, it foresees earnings in the range of $3.60 to $3.80 a share, compared with the First Call estimate of $4.36.
Sears cited the effects of more debt payments related to the credit unit’s sale and having a 53-week fiscal year in 2003 versus 52 in 2004. It said same-store sales should grow in the single-digit percentage range for the year -- hardly a strong comeback for a company that is betting its future on retail. Home appliance and tool sales remain strong.
For 2003, net profit amounted to $11.86 a share, compared with $1.38 billion, or $4.29, in 2002. Revenue was $41.12 billion, down from $41.37 billion.
