Sears Posts Profit, Hints at Takeovers
Sears Holdings Corp. said Thursday that it might spend some of its $3.7 billion in cash for acquisitions as it posted a better-than-expected 83% jump in quarterly profit.
The owner of Sears and Kmart stores, headed by hedge fund manager Edward Lampert, has been cutting costs and eliminating clearance sales to boost profit. The result has been strong cash flow but weak sales.
Second-quarter profit rose to $294 million, or $1.74 a share, before a one-time gain, from $161 million, or 98 cents, a year earlier. Analysts, on average, had expected $1.67 a share.
Including an after-tax gain of $22 million, or 14 cents a share, from the settlement of Visa/MasterCard antitrust litigation, earnings in the latest period were $1.88 a share.
Total revenue fell 3% to $12.8 billion. Sales at stores open at least a year, a key retail measure known as same-store sales, fell 3.8%, with Sears stores down 6.3% and Kmart down 0.6%.
The retailer said Sears stores saw pronounced sales declines in the home fashion and lawn and garden categories. At Kmart, sales of home goods dropped, while apparel, general merchandise, pharmacy and food sales increased.
Sears’ earnings report included an unusually long section discussing possible uses for its cash pile, which includes $3.2 billion in domestic cash and $500 million from Sears Canada Ltd. The retailer also reiterated that Lampert had authority to invest excess cash.
Investors have long expected Lampert to use his hedge fund expertise to orchestrate big takeovers, but the only major deal so far has been a bid to buy the remaining stake in Sears Canada. That deal is tied up in a court battle with dissident shareholders.
“I think it’s a sign that there is something on the horizon,” said Kim Picciola, a retail analyst with Morningstar.
Sears’ shares fell $8.71 to $141.29.
Also
* Barnes & Noble Inc. posted a 23% rise in second-quarter profit of $16.6 million, or 24 cents a share, from $13.5 million, or 18 cents, a year earlier. Sales fell 1% to $1.16 billion. Same-store sales fell 9.1%, dragged down by its smaller B. Dalton chain.
* Upscale department store operator Nordstrom Inc. reported a 20% rise in second-quarter profit of $178.8 million, or 67 cents a share, from $148.9 million, or 53 cents, a year earlier. Sales rose 7.8% to $2.27 billion. Same-store sales rose 5.7%. The Seattle-based company also raised its forecast for the year.
* Grapeville, Texas-based GameStop Corp., the biggest U.S. video game retailer, said second-quarter profit dropped 60% to $3.2 million, or 4 cents a share, from $7.9 million, or 14 cents, a year earlier. Excluding merger-related costs, the company would have earned 6 cents a share. Sales more than doubled to $963 million. Same-store sales rose 3.9%.
