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Sears 4Q profits fall 13.6%

Don Hogsett -- Home Textiles Today, January 22, 2001

HOFFMAN ESTATES, IL -Stung by a weak Christmas season and a dip in its big credit business, Sears, Roebuck and Co., the nation's second-largest retailer, reported that fourth-quarter profits before one-time items fell by 13.6 percent, to $639 million from $740 million last year.

And with pressure from a $251 million restructuring charge to cover the cost of closing 89 stores and eliminating 2,400 jobs, and another $224 million to cover bad consumer debt, net income was dragged down by 40.3 percent, to $442 million from $740 million.

Swimming upstream against a soft economy and a consumer conditioned to wait for after-Christmas bargains, retail sales edged up by 2.4 percent, to $9.2 billion from $9.0 billion last year. But U.S. same-store sales advanced a slender 0.9 percent. Offsetting the modest improvement at retail, credit revenues declined by 4.6 percent, to $1.1 billion from $1.3 billion last year, as consumers reduced their Sears card debt and the company introduced a new Gold MasterCard at a low introductory rate.

With same-store sales virtually flat and margins thinning out, operating profits for the retail business dropped off by more than a third, 37.1 percent, to $452 million from $719 million a year ago. Credit profits declined by 15.2 percent, to $357 million from $421 million.

A bright spot, said Alan Lacy, chairman and ceo, was the company's new home format, The Great Indoors, which recorded "strong" same-store gains in the holiday quarter. "In soft lines, strong performances in footwear and housewares, and solid increases in cosmetics and fragrances and fine jewelry were offset by soft apparel results."

Going forward, Lacy said, "given the slowing economic environment, 2001 will be a challenging year, particularly in the first half."

SEARS, ROEBUCK AND CO.


QTR. 12/30 (x000) 2000 1999 %CHG

Sales

$11,296,000a

$10,958,000a

3.1

Oper. income (EBIT)

1,533,000

1,704,000

-10.0

Net income

442,000b

740,000b

-40.3

Per share (diluted)

1.32

1.98

-33.3

Average gross margin

27.7%

28.8%

-

SG & A expenses

21.9%

21.6%

-

12 MONTHS

2000

1999

%CHG

Sales

36,548,000a

35,141,000a

4.0

Oper. income (EBIT)

4,570,000

4,593,000

-0.5

Net income

1,343,000b

1,453,000b

-7.6

Per share (diluted)

3.88

3.81

1.8

Average gross margin

26.4%

27.1%

-

SG & A expenses

23.6%

23.9%

-


a-Merchandise sales and services, excluding $1.1 billion in credit revenues, down 4.6 percent from the year-ago fourth-quarter. For the 12 months, excludes $4.4 billion in credit revenues, up 1.1 percent from $4.3 billion the prior year.

b-Fourth-quarter net includes a $224 million provision for uncollectible accounts, up 28 percent from $175 million last year; a $251 million restructuring charge, compared with a year-ago credit of $5 million; and a $28 million loss from its minority interest in an outside venture vs. a $34 million prior-year loss. 12-month net includes an $884 million provision for uncollectible accounts, up 1.5 percent from $871 million last year; $251 million in restructuring charges vs. a $41 million charge the previous year; and a $49 loss from its minority interest vs. a $62 million year-ago loss.

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