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Sears Reports Q2 Results
Jul 22, 2004
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Appliance retailer Sears, Roebuck and Co. reported net income of U.S. $53 million, or $0.24 per share, for the second quarter ended July 3, 2004, compared with net income of $309 million, or $1.04 per share, in the second quarter of 2003. The prior year results include the results of the domestic Credit and Financial Products and National Tire & Battery (NTB) businesses divested in the fourth quarter of 2003.

"Like much of the industry, we experienced weak demand in June," said Alan J. Lacy, Sears chairman and CEO. "That, combined with the overhang of our spring apparel assortment and inventory issues, resulted in a disappointing quarter."

Sears' second quarter 2004 earnings included two pretax charges, including $41 million, or $0.12 per share, for severance costs associated with the restructuring of the company's home office organization and field initiatives to gain efficiency. The second charge of $39 million, or $0.12 per share, was for additional depreciation expense due to shortening the estimated remaining useful lives for the assets sold to Computer Sciences Corporation under the previously announced purchased services arrangement.

In the second quarter of 2003, Sears recorded a pretax charge of $28 million, or $0.06 per share, for severance costs associated with productivity improvement initiatives.

The U.S. segment, which includes all domestic retail formats as well as the company's corporate functions, reported operating income of $42 million for the second quarter of 2004, compared with operating income of $466 million in the second quarter of 2003. The prior year results included operating income of $358 million and $6 million, respectively, from the divested domestic Credit and Financial Products and NTB businesses.

Merchandise sales and services revenues for the 2004 second quarter were $7.7 billion, compared with $7.9 billion in the prior year period. Prior year revenues include $106 million attributable to NTB. Overall, U.S. comparable store sales decreased 2.9 percent in the second quarter of 2004.

"We were encouraged by the performance of several businesses during the quarter, ranging from lawn mowers and patio furniture in our Lawn & Garden business, to projection televisions and digital cameras in our Consumer Electronics business," Lacy said.

Sears Canada reported operating income of $11 million for the second quarter of 2004, compared with operating income of $23 million in the second quarter of 2003. Revenues for the second quarter increased 4.6 percent to $1.1 billion due primarily to the effects of foreign exchange.

The company anticipates third quarter earnings per share to be between $0.00 and $0.10, including $0.03 to $0.05 per share of negative carrying cost on the company's remaining legacy debt. The outlook assumes third quarter domestic comparable store sales to be down low single-digits. For the year, the company now expects earnings per share, to be between $2.66 and $2.86, reflecting the year-to-date results and a reduced revenue outlook based upon first-half trends.

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