Sears Canada Inc. boosted its full-year operating-profit forecast, citing sales growth for regular-priced goods after it cut back on discounts. The department store chain said it now expects operating earnings of $1.20 to $1.30 a share, up from an estimate of $1.10 a share announced in mid-October. That suggests operating profit of $128-million to $138-million for the year, up $10-million to $20-million. In October, the company reported net third-quarter profit of $7.3-million, down from $17.9-million a year earlier.
"This represents approximately double last year's operating earnings of 62 cents per share," chief executive Mark Cohen said in a release. "This forecast assumes that current business trends continue through month end December." The fourth quarter, which includes the holiday shopping season, is a crucial one for retailers.
In November, sales of regular-priced merchandise increased by 46 percent, while promotional and clearance sales declined by 27 percent and inventory levels were down $145-million from a year ago. Sales for the four-week period ended Nov. 23 decreased 3.9 per cent, to $622.3 million, however, the sales increase in regular-priced goods meant higher profit margins. "Sales continue to be negatively affected by our strategic reduction in unprofitable promotional activity," Mr. Cohen said.
Major retails including Sears and its competitors the Bay and Zellers, owned by Hudson's Bay Co., have made a conscious effort to cut back on promotions, discounts, and clearance sales and manage their inventories better. That change occurred after retailers' profits suffered because too many discounts at all the retailers clipped margins. During the period, "sales were particularly strong in major appliances, footwear, men's casual wear and women's intimate apparel," Mr. Cohen said.
Sears Canada has a 23 department stores, 43 furniture and appliances stores, over 2,100 catalogue pickup locations, 142 dealer stores, 16 outlet stores, 46 floor-covering centres, 52 auto centres, 111 Sears Travel offices and a national maintenance, repair and installation network. (The Globe and Mail)
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