Sears 4Q profit falls 55 percent on charges, closing 24 stores
Sears Holdings Corp., the largest U.S. department-store chain, said fourth-quarter profit fell 55 percent after holiday sales plunged and the company wrote down the value of its Orchard Supply Hardware unit.
Net income declined to $190 million, or $1.55 a share, from $426 million, or $3.17, a year earlier, the Hoffman Estates-based company said today in a statement.
Revenue dropped 12 percent to $13.3 billion in the three months ended Jan. 31 as U.S. retailers experienced the worst holiday shopping season in four decades. Sales at stores open at least a year have fallen every quarter since Chairman Edward Lampert combined Sears and Kmart almost four years ago.
"From a stock perspective, Sears still has cash, has a very strong Canadian franchise, and continues to perform well with Lands" End and its service business," Gary Balter, an analyst at Credit Suisse in New York, wrote in a report today.
Kmart, however, is "particularly poorly positioned to compete longer term" and Sears is vulnerable to losing more customers to Kohl"s Corp., Best Buy Co., Lowe"s Cos. and Home Depot Inc., he said. He rates the shares "underperform."
Sears fell 29 cents to $35.54 at 4:29 p.m. in Nasdaq Stock Market trading. The shares have lost 8.6 percent this year.
Excluding the after-tax charge of $187 million for Orchard and other items, earnings were $2.94 a share, beating the $2.69 average of analysts" estimates compiled by Bloomberg.
Full-year earnings totaled $215 million, compared with $806 million a year earlier.
In a letter to shareholders today, Lampert said Sears is "well positioned" to rebound when the economy improves. Sears deserves credit ratings comparable to J.C. Penney Co. and Macy"s Inc., because of the extent to which it"s curbed debt, he wrote.
Sears said today that it plans to shutter 24 stores, on top of the eight closings it announced earlier. It cut inventory levels by 12 percent to $8.8 billion as of Jan. 31.
A year ago, Lampert reorganized Sears into five divisions including brands and real estate and ousted Chief Executive Officer Aylwin Lewis.
The company hasn"t offered the CEO job to anybody yet, Lampert said today in the letter.
Sales at stores open at least a year fell 8.3 percent companywide in the quarter, with an 11 percent drop at U.S. Sears locations and a 5 percent decline at Kmart.
Same-store sales at U.S. retailers dropped 2.2 percent in November and December, according to the International Council of Shopping Centers, the worst such decline since it started tracking the data 40 years ago.
The company said it expects pension costs to increase as much as $175 million this year after declines in its portfolio. The company has frozen new contributions to its plan.