Sears Holdings Corp. Wednesday posted a higher-than-expected quarterly profit, as it slashed costs and eliminated profit-crunching markdowns at its Sears stores.
“Sears is on the way back to health,” said Kurt Barnard, president at Barnard’s Retail Forecasting, a retail and consumer goods advisory group. “They’re doing a good job [of cost cutting] and they are offering customers a good, recognizable value and customers are responding.”
Sears Holdings, formed in March 2005 when Kmart acquired Sears, Roebuck and Co., said sales at Kmart stores open at least a year rose 0.9 percent for the 13-week period ended Jan. 28, as demand rose for apparel and home products. It was the first increase in Kmart same-store sales, a key performance measure for retailers, since the second quarter of 2001.
Same-store sales at U.S. Sears stores declined 12.2 percent as the company reduced promotional events, and on weak apparel sales due to a poor response to some fashions.
The company, which is headed by financier Edward Lampert, said it earned $648 million, or $4.03 per share, in the fiscal fourth quarter, up from $309 million, or $3.09 per share, in the same period a year earlier, before the combined company was formed.
Results for the year-ago quarter do not include any results of Sears stores.
Analysts, on average, expected earnings of $3.62 per share, according to Reuters Estimates. The retailer said in January that earnings per share would likely be between $3.55 and $3.95.
Sears cash and cash equivalents balance climbed to $4.4 billion, from $3.4 billion, a year ago.
The year-ago fourth-quarter included gains of $35 million and $46 million on sales of assets and recoveries from bankruptcy-related settlements related to the merger of Sears and Kmart under Sears Holdings.
Total revenue was $16.09 billion, slightly less than analysts’ average estimate of $16.45 billion.
On a pro forma basis, Sears earned $4.03 per share in the latest quarter, compared with $3.62 per share a year earlier.
Reuters Estimates lists only six analysts who follow the stock, compared with 16 for J.C. Penney. Some analysts have questioned whether combining Sears, which has struggled to grow sales, and Kmart, which emerged from bankruptcy protection in May 2003, would create a strong retailer or merely combine the companies’ problems.
In December, Lampert blasted commentators, analysts and journalists, saying many of them were more interested in controversy than accuracy.
Lampert, who orchestrated Kmart’s takeover of Sears last year, has been adding Sears brands such as Kenmore appliances and Craftsman tools to Kmart stores in the hope of combining the best of both retailers.