Sears Fourth-Quarter Profit Rises 27%, Helped By Property Sales

Sears Holdings reported higher fourth-quarter profit on Thursday, helped by property sales and higher operating income at its Sears and Kmart divisions.


The Hoffman Estates, Ill., company said earnings rose 27%, as margins improved despite weaker sales at established stores.

Earnings for the quarter ending Feb. 3 totaled $820 million, or $5.33 a share, from $648 million, or $4.03 a share, in the same period last year. Excluding one-time items, including 17-cent gain from income tax settlements, 29 cents in costs for a legal reserve and a 20-cent gain on asset sales, net income totaled $5.36 a share in the latest period.

Revenue edged up 1% to $16.29 billion from $16.09 billion a year ago, beating Wall Street forecasts.

Analysts polled by Thomson Financial predicted operating profit of $5.18 per share on revenue of $15.95 billion.

The company said results were helped by high margins on apparel at Kmart and Sears stores in the U.S., as well as an extra week in the period compared with last year.

Same-store sales, or sales in stores open at least one year, fell 3.1%. Sears domestic same-store sales fell 4.9%, while Kmart's same-store sales edged down 0.9%. Results were hurt by increased competition and fewer transactions, the company said.

At Sears, same-store sales fell across most categories, but the company noted increases in women's apparel. At Kmart, declines in a number of categories were offset by rises in apparel and pharmacy.

The company's chairman, hedge fund manager Edward Lampert, said in a letter to shareholders published on the company's Web site that he intended to grow, not shrink, the retailer, and said using existing assets, as opposed to opening new stores, was the best way to deliver value in the near term.

Lampert also said the company ended 2006 with more cash on hand than debt, and expressed a belief that Sears was an investment-grade company despite no upgrades from ratings agencies.

He also said the Kmart business was becoming more stable but said the company lagged behind key competitors on metrics such as margin, sales and profit per square foot.

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