Sears Stumbles, Still Beats Street
January 31, 2005,
Hoffman Estates, Ill. — With deep cuts in costs helping to offset weakening sales during the all-important Christmas quarter, Sears, Roebuck and Co. recorded a fourth-quarter profit of $378 million, or $1.76 a share, besting a Wall Street expectation of $1.66.
Sales during the Christmas selling season skidded 4.6 percent, to $11.1 billion from $11.6 billion, reducing year-over-year sales by more than half a billion dollars, or $533 million.
Accounting for most of the shortfall in sales, last year's fourth quarter included an extra week of Christmas sales, which generated $560 million in revenues. Another $80 million in sales in the year-ago quarter stemmed from the National Tire & Battery business, which was subsequently sold off. Ironing out the one-time items that cloud the year-over-year sales picture, same-store sales were virtually flat during the period, slipping just 0.2 percent.
“As we forecasted in October, domestic comparable store sales were flat during the fourth quarter, with sales increases in October and November offset by a decline in December,” said Alan Lacy, chairman and CEO. Looking beyond the quarter, Lacy added, “The year was marked by further restructuring and repositioning of our core retail business, which slowed short-term results, but positions us well for the future.”
Helping to offset lower sales triggered by the one fewer week of holiday sales and the sell-off of the National Tire business, the retailer continued to hack at overhead costs. Measured as a percentage of sales, operating costs were whittled 50 basis points, of one-half of a percentage point, to 20.5 percent from 21 percent. More meaningfully, costs were pared by 6.8 percent when measured in dollars, to $8 billion from $8.2 billion, generating a cash savings of $167 million.
Sears, Roebuck and Co.
|Qtr. 1/1 (x000)||2004||2003||% change|
a. Merchandise sales and services for the fourth quarter, excluding $124 million in revenues from the sold-off credit business, down from $616 million last year. For the 12 months, credit and financial services revenues totaled $381 million, compared with $4.8 billion the prior year.
b. Fourth quarter results include a $21 million provision for uncollectible accounts, compared with $236 million during the prior-year period; $3 million in miscellaneous income, compared with $4.2 billion last year, when the retailer sold off its credit portfolio; a $46 million loss from the company's minority stake in a joint venture, compared with a year-before loss of $29 million. Results in the prior-year quarter include a $791 million loss on the early retirement of debt.
c. 12-month results include a $64 million provision for uncollectible accounts, compared with $1.7 billion during 2003; $41 million in special charges and impairments, compared with $140 million the preceding year; miscellaneous income of $61 million, compared with $4.3 billion last year, when the retailer sold its credit business; a $61 million loss from the company's minority stake in a joint venture, compared with a $45 million year-before loss; and a $839 million charge stemming form a change in accounting. Prior-year results included a $791 million loss on the early retirement of debt.
|Oper. Income (EBIT)||912,000||1,591,000||-42.7|
|Per share (diluted)||1.76||10.84||-83.8|
|Average gross margin||27.6%||29.4%||—|
|Oper. Income (EBIT)||1,850,000||5,810,000||-68.2|
|Per share (diluted)||(2.26)||11.86||—|
|Average gross margin||27.2%||27.9%||—|