Kmart sales surge benefits Sears Holdings
March 15, 2006,
Hoffman Estates, Ill. – Fourth-quarter profit at Sears Holdings Corp. more than doubled, soaring by 109.7%, to $648 million from $309 million last year. The rise was aided by improving margins as markdowns were cut and promotional events were reduced. Stronger same-store sales at Kmart added a further lift.
Crucially, in something of a milestone for Kmart, the retailer boosted same-store sales during the closing quarter of 2005 by 0.9%, the first time Kmart has put up a gain in same-store sales since the second quarter of 2001. Same-store sales, the retailer said, were boosted by stronger sales of apparel and home products.
But the news was different at Sears, where same-store sales plunged by 12.2%, hobbled by weak apparel sales, the failure of new fashion offerings and fewer sales events.
While the drop in promotional events may have hurt same-store sales at Sears' full-line stores, it resulted in wider margins and bolstered the bottom line of its parent. As the retailer took fewer markdowns, average gross margin widened by 340 basis points, or 3.4 percentage points, to 28.5% from 25.1% a year ago.
Wall Street applauded the stronger profit; shares of Sears Holdings had jumped by 12% in value, rising by $14.05 a share to $131.32 in mid-day trading.
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