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Sears Returns to Profit; Plans Canadian Spinoff

AP
Thursday, 17 May 2012 | 7:01 AM ET

Sears Holdings returned to a first-quarter profit, benefiting from a gain on the sale of some stores.

Sears
AP
Sears

The Hoffman Estates, Ill., company, which runs Sears, Kmart, and Lands' End, also said Thursday that it plans to spin off a minority stake in Sears Canada.

Sears earned $189 million, or $1.78 per share, for the period ended April 28. It lost $170 million, or $1.58 per share, a year ago.

The current quarter included a $233 million gain on the sale of some U.S. and Canadian stores and leasehold interest.

Excluding store closing costs and other items, Sears lost 31 cents per share from continuing operations. Analysts expected a loss of 67 cents per share.

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Revenue slipped 3 percent to $9.27 billion, partly hurt by unfavorable foreign currency exchange rates and having fewer stores open during the period. Still, the performance managed to beat Wall Street's forecast of $9.26 billion.

Revenue from Sears stores in the U.S. open at least a year fell 1.6 percent, while the figure dropped 1.6 percent for Kmart locations. Both Sears and Kmart stores experienced soft sales of consumer electronics, but stronger sales of clothing and footwear.

For Sears Canada, the metric slid 6.3 percent on declines in electronics, home decor, hardware, and clothing. This figure is a key indicator of a retailer's health, because it excludes results from stores recently opened or closed.

Sears Chief Financial Officer Rob Schriesheim said in a statement that the company anticipates that it will generate $1.6 billion to $1.7 billion in capital this year through the sale of certain stores in the U.S. and Canada, as well as the spinoff of its smaller Hometown and Outlet stores.

Sears' cash balance climbed to $784 million from $754 million over the three-month period ending April 28. It has also reduced inventory levels and trimmed its total debt to $3.2 billion at quarter's end, down from $3.5 billion.

Earlier this month at its annual meeting, Sears executives emphasized the company's financial strength, increased liquidity and prospects to boost operational results. During the meeting, Chairman Edward Lampert said that real estate sales were important to restore profitability and to get shareholders' confidence back.

Sears will keep an approximately 51 percent stake in Sears Canada, down from 95 percent. The proposed spinoff is expected to close this year, with Sears Canada continuing to list on the Toronto Stock Exchange after the deal's closing.

Sears currently has more than 3,900 stores in the U.S. and Canada.

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