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Sears generates profitable Q1, amends credit facility

Hoffman Estates, Ill. -- Sears Holdings -- parent company of Sears and Kmart, and a majority stakeholder in Sears Canada -- posted a first quarter profit of $26 million, or 21 cents per share, compared to a net loss of $56 million, or 43 cents per share, in the year-ago period.

Consolidated sales for the quarter ended May 2 fell 9% to $10.1 billion. Revenues were primarily hurt by lower comp sales but also fell $208 million due to unfavorable foreign currency exchange rates.

U.S. comp sales fell 7.4%. Comps at Sears dropped 11.7% as home-related and apparel categories remained soft. Kmart’s comp declined 2.1%, with lower apparel sales partially offset by improved sales of home electronics and the impact of assuming its footwear business from a third party this past January.

Gross margin rate grew by 130 basis points to 28.6% as selling, general and administrative expense fell by $168 million, or 6.7%.

"In this challenging economic environment we are pleased with the progress we have made in improving our gross margin rate, controlling inventories and further reducing our cost structure," said Bruce Johnson, interim ceo and president.

The company also announced it has amended and extended its credit facility to provide $4.1 billion in financing through March 24, 2010, and $2.4 billion from March 25, 2010 through June 2012, with the option to use existing collateral to obtain up to $1.0 billion of additional capacity subsequent to March 2010 through an accordion feature.
   

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