Sears Domestic Stores Segment Product Sales Slide
By Jeff Malester -- TWICE, 7/22/2004
Hoffman Estates, Ill. — Sears reported a decline in second-quarter U.S. store merchandise sales and services for its domestic segment, down to $7.7 billion from $7.9 billion last year, but the chain was encouraged by the performance of projection TV and digital camera sales.
Domestic stores operating income in the second quarter plunged to $42 million from a year-earlier $466 million, due mainly to the divestiture of its credit operation. The prior-year results included operating income of $358 million from the divested credit and financial products business.
“Like much of the industry, we experience weak demand in June, said Alan Lacy, chairman/CEO. “That, combined with the overhang of our spring apparel assortment and inventory issues, resulted in a disappointing quarter.”
Gross margin rate in the second quarter for Sears’ domestic segment increased to 27.9 percent from 27.5 percent in the same quarter in 2003, primarily due to the income from revenue earned under a long-term alliance with Citigroup.
Domestic segment expense hit $1.8 billion in the second quarter, including a $21 million pretax charge, compared with $2 billion in the same period last year, including about $243 million related to divested businesses.
For the first half, merchandise sales and service in Sears’ domestic segment hit $14.5 billion, down from $14.6 billion in the same six months in 2003. Domestic stores operating income was $3 million in the first half, off from $765 million in the same period last year.
Consolidated Sears revenue for the second quarter came in at $8.7 billion, down 14 percent from the $10.2 billion recorded in the same three months last year. Merchandise sales and services alone dropped to $8.7 billion from $8.9 billion.
Net income hit $53 million, compared with $309 million in the same quarter in 2003. Second-quarter 2004 pretax charges totaled $80 million. The second quarter of 2003 included a $28 million charge.
For the six months, Sears consolidated revenue reached $16.6 billion, down from $19.1 billion year-on-year. Merchandise sales and services came in at $16.4 billion for the six months, compared with $16.3 bullion year-over-year.
Sears reported a six-month net loss of $806 million, compared with net income of $501 million in the first six months of 2003.
In the third quarter, Sears expects domestic comp-store sales to be down in the low single digits.
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