Sears Swings From Black To Red

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.

Merchandise sales and services dropped 2.4 percent, to $8.2 billion from $8.4 billion

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.
Sales $8,210,000a $8,409,000a -2.4
Oper. Income (EBIT) 19,000 635,000b -97.0
Net income (61,000)c 147,000c
Per share (diluted) (0.29) 0.52
Average gross margin 26.2% 27.0%
SG&A expenses 24.5% 26.5%
Nine months
Sales 24,613,000a 24,734,000a -0.5
Oper. Income (EBIT) 178,000 2,027,000b -91.2
Net income (867,000)c 648,000c
Per share (diluted) (4.03) 2.17
Average gross margin 27.0% 27.2%

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