Sears 2Q profit drops on lower sales
Sears Holdings Corp. said today that its second-quarter profit dropped 40 percent because of lower overall sales and weaker operating results from Kmart and its domestic Sears operations.
Shares of the big retailer dropped more than 5 percent on premarket trading.
The earnings were also being compared with results that included a gain on a large legal settlement a year ago.
"We are disappointed with our second quarter results," said Aylwin Lewis, Sears Holdings' chief executive and president.
Net income for the period ended Aug. 4 fell to $176 million, or $1.17 per share, compared with $294 million, or $1.88 per share, in the previous year.
Quarterly revenue dipped 4 percent to $12.24 billion versus $12.79 billion a year ago.
Analysts polled by Thomson Financial expected earnings of $1.13 per share after the company narrowed its earnings projections earlier this month. The analysts' estimates typically exclude one-time items.
"Our gross margins came under pressure from sales declines and increased promotional activity, and as a result, our net income was significantly below last year and our expectations," Lewis said in a statement.
The Hoffman Estates-based company said the lower operating results at Sears Domestic and Kmart were partially offset by improved results at Sears Canada.
Still, same-store sales at Sears' U.S. stores fell 4.3 percent while Kmart's comparable store sales declined 3.8 percent. Same-store sales figures are an important retail industry metric of stores open at least one year.
Sales in Kmart and Sears stores were sluggish in nearly all categories. However, some increases were recorded in both stores' women's apparel lines and Sears' footwear and consumer electronics.
The prior year's results included a gain of $22 million, or 14 cents per share, related to the settlement of Visa/MasterCard antitrust litigation.
Sears said it had $2.6 billion in cash and equivalents on hand at the end of the quarter and had repurchased about $1.5 billion in shares.
Sears stock fell $7.61, or 5.2 percent, to $138 in pre-market trading Thursday.