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Sears Reports Lower Q1 Sales, Operating Loss

HOFFMAN ESTATES, ILL. — Hard hit by a slowing economy and colder-than-anticipated weather, the retail stores segment of Sears, Roebuck and Co., saw first-quarter sales drop slightly and operating income move into the red.

Retail and related services revenues for the first three months ended March 31 totaled $6.81 billion, down less than 1 percent from the $6.83 billion reported in the same quarter last year. Sales increases at The Great Indoors, Sears’ online business and hardware stores were offset by declines in full-line stores, commercial sales and automotive stores, said the chain.

The retail segment posted an operating loss of $56 million, compared with an operating income of $21 million in the prior year period. The decline was due primarily to lower-than-anticipated revenues and pressures on margins and expenses, as well as investment in The Great Indoors, said Sears.

Both the economy and the cold weather were blamed for having an impact on Sears’ hardlines business. In hardlines, however, the company experienced strong growth in electronics and home appliances, said Sears. (See related story on p. 30.)

Gross margin in the retail segment declined by 70 basis points to 24.3 percent during the first quarter, compared with the year-ago period, reflecting increased promotional markdowns, particularly in softlines, as well as a balance-of-sale shift to hardlines products.

Selling and administrative spending increased 1.9 percent in the first quarter, due mainly to investments in The Great Indoors, while, as a percent of revenue, selling and administrative expenses were 50 basis points higher than last year’s first quarter.

Overall, Sears reported a 25.1 percent decline in earnings, posting a net income of $176 million in the first quarter, compared with $235 million in the same three months in 2000. First-quarter revenues were flat, coming in at $8.86 billion, compared with $8.93 billion in the first quarter of last year.

Sears said its total store count, including full-line and specialty formats, dropped to 2,987 units as of March 31, compared with 3,021 stores at the end of 2000.