Sears (SHLD) quarterly profit plunges 47.5% on weak sales

05 03 2008

Sears (SHLD) quarterly profit plunges 47.5% on weak sales

Posted by: in Products and Services

Filed under: Earnings reports, Forecasts, Products and services, Management, Wal-Mart (WMT), Sears Holdings (SHLD)

Shares of department store retailer Sears Holdings Corp. (NASDAQ: SHLD) have moved higher this morning, despite the fact that the company posted a 47.5% decline in fourth-quarter profit, hurt by increased markdowns and weak sales of its products.

The retailer announced that its quarterly profit dropped to $426 million, or $3.17 a share on declining margins as sales at its Kmart and Sears stores slipped due to the weak U.S. economy and increased competition. These numbers are down from $811 million, or $5.27 per share reported in the same period a year ago.

Included in the company’s earnings numbers was a one-time gain related to the sale of some assets. Excluding that, Sears earnings numbers would have come at $3.04 per share. Analyst estimates (which typically exclude one time items) was for $3.10 per share in the quarter.

Looking at revenue, Sears Holdings saw a drop of 6.8% to $15.1 billion, down from $16.18 billion a year earlier. The retailer had to face continued economic worries such as higher gasoline prices and declining housing markets that put a curb on consumer spending. Analysts forecast revenues of $15.26 billion for the quarter, according to Thomson Financial.

Looking at same stores sales (sales at stores open at least 12 months), the quarter saw a decline of 4.5%. Weak demand for apparel and home appliances resulted in declines of 4% at U.S. Sears stores and 5.2% at Kmart. Sears Holdings blamed not only the weak economy but also increased competition for its disappointing results as rivals such as Wal-Mart Stores Inc. (NYSE: WMT) or J.C. Penney Inc. (NYSE: JCP) benefited from the company’s lost lost traffic and sales.

Continued fears over a possible recession made the department store retailer face a pretty difficult 2007. The weak housing market and credit crush brought a slowdown in consumer spending whose effects are reflected in the company’s earnings.

Despite the disappointing quarter, traders seem to be betting that the worst is over the company, and have pushed shares of the stock up 2.5% to $104.40, up $2.80. Earlier in the session the stock had traded down as low as $98.07 before reversing course and moving higher.

Eliza Popescu is a financial writer for the online investment advisory service Investor’s Observer.