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Selling units, Sears triples profits

Banking $4.1 billion from the sale of its credit-card and financial-services business, Sears, Roebuck and Co. more than tripled fourth-quarter profits, which soared by 224.2 percent, to $2.7 billion from $848 million last year.

In another non-recurring lift to the bottom line, the retailer pocketed another $81 million from the sale of its National Tire & Battery unit.

Looking at what's left, sales in its core retailing business improved by 5.2 percent during the Christmas quarter, to $11.6 billion from $11.1 billion last year, helped by an additional week in last year's 53-week calendar.

But the crucial gauge of same-store sales declined by 2.1 percent, hurt, the retailer said, by "later than anticipated consumer season purchases and a difficult promotional environment."

Hampered by increased promotional activity, particularly in apparel, average gross margin thinned by 60 basis points, or six-tenths of a percentage point, to 29.4 percent from 30 percent. Picking up the slack, the retailer hacked away at costs, which improved by 260 basis points, or 2.6 percentage points, to 21.0 percent from 23.6 percent the prior year.

Measured in absolute dollars, costs were whittled down by 6.4 percent, to $2.5 billion from $2.6 billion last year.

Sears, Roebuck and Co.

Qtr. 12/28 (x000) 2003 2002 % chg
Sales $11,638,000 $11,059,000 5.2
Oper. income (EBIT) 1,591,000 2,162,000 -26.4
Net income 2,749,000a 848,000a 224.2
Per share (diluted) 10.84 2.67 306.0
Average gross margin 29.4% 30.0% --
SG&A expenses 21.0% 23.6% --
12 months 2003 2002 % chg
Sales 36,372,000 35,698,000 1.9
Oper. income (EBIT) 5,782,000 6,471,000 -10.6
Net income 3,397,000b 1,376,000b 146.9
Per share (diluted) 11.86 4.29 176.5
Average gross margin 27.9% 28.2% --
SG&A expenses 25.0% 25.9% --
a-Fourth-quarter results include a $791 million loss on the early retirement of debt; a $4.1 billion gain on the sale of the credit and financial products unit; an $81 million gain on the sale of the National Tire & Battery unit; a $236 million provision for uncollectible accounts, down from $576 million last year; miscellaneous income of $11 million, compared with $274 million in the year-ago period; and a $29 million loss on the company's minority interest in a joint venture, compared with a $34 million year-before loss.
b-12-month results include a $791 million loss on the early retirement of debt; $112 million in special charges and impairments, compared with $111 million in 2002; a $1.7 billion provision for uncollectible accounts, compared with $2.3 billion last year; for a $4.1 billion gain on the sale of the credit and financial services business; an $81 million gain on the sale of National Tire & Battery; miscellaneous income of $27 million, compared with $372 million last year; and a $45 million loss on the company's minority interest in a joint venture, compared with an $11 million year-ago loss. Prior-year results include a $208 million charge stemming form a change in accounting for goodwill.


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