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As domestic comp-store sales at Sears stores continued a downward slide — off 12.2 percent in the company's fiscal fourth quarter — the retailing company combining Sears and Kmart stores, called Sears Holdings, reported more than a doubling of net income in the three months, hitting $648 million, up from $309 million the previous year.
The company was able to post its healthy fourth-quarter profit due to ongoing cost-cutting and the addition of Sears into the retail mix, even though the Sears locations reported a steep decline in sales.
Comp-store sales at Kmart stores in the fourth quarter, ended Jan. 28, fared better than Sears locations, with the Kmart units registering nearly a 1 percent comp-store rise during the period, due primarily to an increase in sales of home products and apparel.
The current financial statement for Sears Holdings marks the first anniversary of the marriage of the two giant retailers, which merged last March 24. For accounting purposes, the business combination was treated as a purchase of Sears by Kmart.
Sears domestic sales declined 6.1 percent year-on-year in the fourth quarter due to the comp-store decline, partially offset by an increase in the total number of Sears stores and strong home services sales. The decrease in comps reflects the retailer's efforts initiated in 2005 to improve gross margin by reducing reliance on certain promotional events, among others.
Total revenue for Sears Holdings for the fourth quarter slipped to $16.1 billion from a pro forma $16.8 billion in the same quarter the previous year. As reported, the three-month sales climbed from $6 billion a year ago, to $16 billion in the most recent fourth quarter. Sales, as reported, do not include the results of Sears stores in the year-ago fourth quarter.
The $648 million net income for the quarter compares with $589 million pro forma in the same three months the prior year. Gross margin increased to 28.3 percent in the three months, compared with a pro forma 27 percent year-on-year.
Financials provided on a pro forma basis are reported results as if Kmart had bought Sears at the beginning of fiscal 2004.
Full-year revenue for Sears Holdings hit $49.1 billion, up from $19.8 billion in the same period the prior year. On a pro forma basis, revenue climbed to $54.3 billion in the fourth quarter, compared with $56 billion pro forma year-over-year.
Full-year net income fell to $858 million from $1.1 billion. Pro forma net income for the 12 months came in at $789 million, down from a pro forma $884 million in the year-ago period.