Sears Swings From Black To Red
October 25, 2004,
With same-store sales falling off 4 percent, and margins under heavy pressure, Sears, Roebuck and Co. recorded a third quarter loss of $61 million, compared with a year-before profit of $147 million.
The loss came even though the retailer slashed its operating costs during the third quarter, generating $220 million in year-over-year savings as it put behind it $184 million in costs related to sold-off businesses.
The retailer posted an operating loss of $106 million in its U.S. business during the period, compared with an operating profit of $222 million last year. Prior year results included $369 million in operating income from the sold-off credit business.
Alan Lacy, Sears chairman and CEO, commented, “A number of factors contributed to a disappointing third quarter, including softer retail demand, larger than expected costs associated with seasonal transitions and a slower ramp up of sales following certain business resets.”
An unforgiving Wall Street responded by pounding Sears stock down $2.79 a share, or 7.6 percent, to $34.13 a share, in mid-day trading on Oct. 21.
Sears, Roebuck and Co.
|Qtr. 10/2 (x000)||2004||2003||% change|
a - Merchandise sales and services, excluding revenues from the sold-off credit card business.
b - Prior-year operating profits included results of the now-divested credit card business.
c - Third quarter results include a $16 million provision for uncollectible accounts, down from $567 million last year; a $7 million loss on the company's minority stake in another business, compared with a year-before loss of $6 million; and income-tax expense of $25 million, compared with a prior-year tax benefit of $91 million. The prior-year third quarter included a $112 million special charge. Nine month results include a $43 million provision for uncollectible accounts, compared with $1.5 billion during the same period a year ago; $41 million in special charges vs. $140 million last year; $2 million in income tax expense vs. a year-before tax benefit of $392 million; and a $15 million loss from the company's minority stake in another business, compared with a $16 million loss a year ago.
|Oper. Income (EBIT)||19,000||635,000b||-97.0|
|Per share (diluted)||(0.29)||0.52||—|
|Average gross margin||26.2%||27.0%||—|
|Oper. Income (EBIT)||178,000||2,027,000b||-91.2|
|Per share (diluted)||(4.03)||2.17||—|
|Average gross margin||27.0%||27.2%||—|