Sears profit more than doubles in fourth quarter

A return of Kmart shoppers and an effort to cut costs helped Sears Holdings Corp. post its best quarterly profit in three years, the department store chain said Tuesday.

Led by financier Chairman Edward Lampert, the results at the company's discount division offered back-to-back glimmers of a tentative revival for the retailer, which has long suffered as customers skipped out on stores for other competitors.

Until last fall, sales in Kmarts open at least a year had fallen every quarter since 2002. But the bad economy was good news for the brand, which boosted its marketing, launched a catchy slogan ("there's smart, and there's Kmart smart") and promoted its pay-as-you-go layaway plans.

That momentum continued in the fourth quarter, which ended in January, as Kmart shoppers snatched up cheap toys and home goods.

Still, there's much work to be done to bring the turnaround, analysts said.

Although sales in established Kmart stores -- a key measure -- climbed 1.7 percent in the fourth quarter -- they were still overshadowed by falling business at Sears stores.

In Sears stores open at least a year, sales were down 6.1 percent. Much of that decline came because the retailer is known for its expensive appliances, which are harder to sell when times are tight.

"Our improved performance is especially encouraging given the challenging economic environment, particularly related to big-ticket items," W. Bruce Johnson, Sears Holdings' interim CEO and president, said in a statement.

For the quarter, Sears earned $430 million, or $3.74 per share, during the fourth quarter. That's up from a profit of $190 million, or $1.55 per share, during the same period last year.

Revenue for the three months that ended Jan. 30 dipped less than 1 percent to $13.25 billion.

Analysts surveyed by Thomson Reuters expected the merchant to earn $3.54 per share on revenue of $12.90 billion.

Sears, based in Hoffman Estates, hasn't had such a strong quarter since the fourth quarter of 2006, when it earned $820 million.

For the full year, Sears earned $235 million, or $1.99 per share. That's up dramatically from its 2008 profit of $53 million, or 42 cents per share. Revenue slipped almost 6 percent to $44.04 billion.

Meanwhile, in an annual letter to investors, Lampert said the company was still working to rebuild its brands by making its stores more efficient, its service more convenient and its Web presence even greater -- a rebuke to those who've criticized the company for cutting costs too drastically.

Sears has started to allow outside merchants to sell products on its Web sites. And the company is tweaking some of its most popular brands like Lands' End and Kenmore while also allowing some of its DieHard and Craftsman products to be sold at non-Sears stores.

"Our early efforts in these areas are bearing fruit," he said.

But at least one analyst called the missive overconfident, saying that Lampert's decision to shy away from store renovations will save it money but most likely cost it customers who skip out on the chain for competitors like Lowe's and Home Depot.

"It is not that Sears did not do better this year; it did, helped by having inventory in line but also by just managing the business better," Credit Suisse analyst Gary Balter told investors in a research note. "However, in our view, the road for Sears from here is quite different than the road we believe Home Depot, Lowe's and other cheaper names will take over the next few years."

In this year's message, which offers a rare glimpse into the typically reclusive billionaire's thoughts about the company and the economy, Lampert railed against the credit rating system and argued for less government spending and regulation. He also criticized governments for allowing rival Amazon.com to continue to sell its products without charging sales tax in most states.

"Either we all collect taxes or nobody collects taxes," Lampert wrote.

Sears shares fell $1.86, or 1.9 percent, to $93.80 Tuesday, partly hit by a steep decline in the Conference Board's Consumer Confidence Index.

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