Retail

Sears post 3Q net loss of $61 million

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Sears, Roebuck and Co. reported a net loss of $61 million on net sales of $8.3 billion for the third quarter ended October 2, 2004. That compares to income of $147 million on sales of $9.8 billion for the third quarter of 2003.

Third-quarter results from 2003 include the results of the domestic Credit and Financial Products and National Tire & Battery (NTB) businesses divested in the fourth quarter of 2003. Earnings included a pretax charge of $141 million related to the company´s refinement of its business strategy for The Great Indoors.

"A number of factors contributed to a disappointing third quarter, including softer retail demand, larger than expected costs associated with seasonal transitions and a slower ramp up of sales following certain business resets," says Chairman and CEO Alan Lacy.

In its "Domestic" segment (which includes all domestic retail formats as well as the company´s corporate functions), Sears reported an operating loss of $106 million for the third quarter of 2004, compared with operating income of $222 million in the third quarter of 2003.

The prior year results included operating income of $369 million and $6 million, respectively, from the divested domestic Credit and Financial Products and NTB businesses, and a pretax charge of $141 million related to the company´s refinement of its business strategy for The Great Indoors.

Merchandise sales and services revenues for the 2004 third quarter were down 4%, from $7.4 billion to $7.1 billion Third-quarter 2003 revenues included $115 million attributable to NTB.

Overall, domestic comparable store sales decreased 4% in the third quarter of 2004 vs. the same period a year ago.

Sears Canada posted operating income of $21 million for the third quarter of 2004, compared with operating income of $20 million in the third quarter of 2003.

Canadian revenues for the third quarter increased 11.2%, to $1.2 billion, due to "increased sales across most formats as well as the effects of foreign exchange."

On September 29, 2004, the company closed the acquisition of ownership or leasehold interest in 50 stores from Kmart Holding Corp. for $575.9 million. The company has paid 30% of the overall purchase price for these properties, with the remaining 70%to be paid upon Sears taking possession of the stores. Sears will take possession of the stores in spring 2005 and expects to convert them to Sears nameplates by the fourth quarter of 2005.

Sears also agreed to make lease payments to Wal-Mart under subleases for six Wal-Mart stores. Sears has taken possession of two Wal-Mart stores and has targeted possession of an additional two stores in 2005 and the remaining two stores in 2006.

"Based on our sales and margin performance over the past two quarters, coupled with a more cautious holiday outlook, we have adopted a more conservative outlook for the fourth quarter," says Lacy. "While we remain optimistic about a favorable holiday shopping season, we believe that it is appropriate to lower our fourth quarter sales and margin assumptions."

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