Sears' Q2 Earnings Slide 62%
By Alan Wolf -- TWICE, 8/28/2008
Hoffman Estates, Ill. — Sears Holdings said increased competition and the slowing economy contributed to a 62 percent drop in second quarter net income, to $65 million.
The results include the positive impact of a $62 million legal judgment in Sears’ favor.
Total revenue slipped 4 percent to $11.8 billion for the three months ended Aug. 2, while same store sales fell 6.2 percent, reflecting a 6.7 percent drop at Sears stores and a 5.6 percent decline at Kmart.
The company’s gross margin rate fell from 27.7 percent to 26.5 percent year-over-year due to increased markdowns prompted by “the intense competition for consumer business,” the company said.
“Our second quarter results reflect the continued effects of a slowing economy which contributed to the earnings declines we have experienced since the third quarter of 2007,” acknowledged president and interim CEO Bruce Johnson.
On the product front, CE proved to be one of the company’s few bright spots, with gains in electronics offsetting sales declines across most major categories including major appliances. Majaps is among several categories directly impacted by housing market conditions, Sears said, although the increased costs of consumer staples such as food and gas have also reigned in discretionary spending.
Johnson added that the company continued to cut costs during the second quarter, including $46 million in payroll and advertising expenses and $500 million in inventory.
Sears also added 65 net stores year-to-date, including Home Appliance Showrooms, dealer stores and outlets, and vastly increased its selection of movies, music, software and books on Sears.com, nearly quadrupling its SKUs.
Looking ahead, Johnson projected flat to modestly lower same store sales and flat earnings for the balance of the year.
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There are a heck of a lot of factors that contribute to Sears' continuing slow death by strangulation. It so meaningless to attribute it to "increased competition" and the economy.
Other retailers are facing the same economic factors that Sears faces and they continue to eat Sears' lunch in terms of sales and market share. They couldn't do that if the management at Sears was up to the task and had some idea as to what they're supposed to be doing.
The competition only "increases" at your expense if you show yourself to be incapable of preventing it or unwilling to try. The evidence of the past two and a half years indicates that in Sears' case, it's probably the latter.
It's about time the media knocked off it's love affair with the "boy genius of retailing" and "brilliant financial guru" and admit that Edward Lampert made his reputation picking low hanging fruit when there was a lot of it around to pick and is nowhere near as "brilliant when it comes to turning a profit by having to climb for it.
You don't turn a retailer into a hedge fund or even a holding company nor do you try to run a retail organization like you would a hedge fund or holding company and expect it to succeed as a retail organization.
Tom Bales - 2008-4-9 15:27:00 EDT -
Well, I guess they operate about the same as everyone else. Welcome to my world. (lol)
Steven Hall - 2008-4-9 11:08:00 EDT -
There are many happy ex-Sears/K-Mart employees after reading this article, but their true "day of reckoning" will come if the company continues to mis-manage themselves out of business. Consumers know they're getting gouged if they buy there (hence the reduced sales figures) and they won't be taken care of after the sale, either. And former employees feel that way because they were used like slaves when they worked there, & the ones who did want to work F/T there couldn't because the company didn't want to protect them by offering benefits. They can't die fast enough!
Britney Sears - 2008-4-9 09:00:00 EDT
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