Hoffman Estates, Ill. - With merchandise repositioning efforts underway - setting the groundwork for restoring top-line growth in the second half of 2003 - Sears reported a near 2 percent drop in first-quarter sales for its retail business.
Retail revenue for the period, ending March 29, came in at $6.6 billion, compared with $6.8 billion in the year-ago first three months. Comp-store sales for the quarter declined 6.7 percent, due to a weak retail environment, the effects of merchandise category exits and edits and the late Easter holiday. The revenue decline was more pronounced in softlines than hardlines, said Sears.
Sears' retail segment posted a $23 million operating loss in the first quarter, compared with a 'very strong' $87 million operating gain in the year-ago three months. Ironically, the quarterly income of a year ago came at a time of the lowest quarterly period of the year in terms of merchandise sales and profit.
The gross margin rate for Sears' retail business was flat in the first quarter, compared with the prior year, as an increase in seasonal clearance activity was offset by the inclusion of Lands' End and continued improvements in sourcing.
Selling and administrative expenses climbed by $49 million in the period, due to inclusion of Lands' End, which was partially offset by expense reductions in most of the remaining retail businesses.
Consolidated revenue for the first quarter hit $7.5 billion, down from $7.6 billion year-on-year. Net income reached $192 million, down from $318 million in the same quarter in 2002. First-quarter results in 2002 included an after-tax charge of $208 million. Included with other charges, the aggregate reduced first-quarter 2002 net income by $190 million.
Given the current economic environment and cautious consumer sentiment, Sears expects that near-term retail sector growth will be modest. The second quarter outlook assumes a mid-single-digit comp-store sales decrease.