Sears anticipates returning to a profit in 1Q

[May 02, 2012]  HOFFMAN ESTATES (AP) -- Sears Holdings Corp.'s stock jumped Tuesday after the retailer said it expects to post a first-quarter profit because of a large gain from the sale of some U.S. and Canadian stores.

The company also said a key revenue metric declined, as sales of consumer electronics were weak at both its Sears and Kmart stores.

Investors were enthused about the first-quarter guidance, sending Sears' stock up $9.47, or 17.6 percent, to $63.25 in afternoon trading. The shares have jumped 66 percent for the year to date and have traded in a 52-week range of $28.89 to $86.72.

The Hoffman Estates, Ill. company expects first-quarter earnings from continuing operations of $155 million to $195 million, or between $1.46 and $1.84 per share. That compares with a loss of $1.53 per share a year ago. Analysts polled by FactSet had predicted a loss of $1.69 per share.

The current period's results include an approximately $235 million gain from the sale of certain U.S. and Canadian stores. The store sales resulted in $440 million in cash proceeds.

Excluding the sale, Sears' projected loss would come to between $40 million and $80 million, narrower than the $165 million in the same quarter last year.

CEO and President Lou D'Ambrosio reiterated in a note to employees that "if we execute with a focus on our customers and take actions to improve operations we can change the direction of our company. We are doing that and we're starting to see the results."

"However, this is just the beginning, as we have a way to go to restore the strength of Sears Holdings," he added.

Revenue at its Sears and Kmart stores in the U.S. open at least a year declined 1.3 percent. This figure is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.

At Sears stores, the metric dropped 1 percent and at Kmart it fell 1.6 percent.

The company said that its Sears and Kmart stores experienced strength in clothing and footwear sales, but that sales of consumer electronics were soft. Sears also reported a dropoff in appliance sales.

Sears Canada anticipates a decline of 6.2 percent in revenue at stores open at least a year on weakness in electronics, home decor, hardware and clothing, somewhat offset by strength in major appliances and mattresses.

Sears announced in February that it will spin off its Hometown and Outlet stores as well as some hardware stores in a deal expected to raise $400 million to $500 million. Last month the company completed the $270 million sale of 11 of its stores to real estate company General Growth Properties. Sears also plans to cut inventory by $580 million.

The announcements followed word in December that Sears, which is led by billionaire investor Edward Lampert, would close between 100 to 120 stores to raise cash after a disappointing holiday season.

Sears will hold its annual shareholders meeting on Wednesday. The company has more than 4,000 stores in the U.S. and Canada.

[Associated Press]

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