While Sears Holdings continues the integration process of Kmart and Sears, it continues to utilize the reporting structures which existed independently prior to the merger last March. As a result, there are three reportable segments — Kmart, Sears Domestic and Sears Canada.
At Sears Domestic segment, comp-store sales declines for the fiscal third quarter were recorded across all product categories except home appliances, said Sears. The modest increase in the home appliance category was due mainly to a higher average sale price per unit sold. Comp sales of consumer electronics decreased during the quarter.
For the quarter, total revenue at Sears Domestic dropped to $6.8 billion from a year-earlier pro forma $7.3 billion. Operating income for the segment in the quarter reached $68 million, compared with a pro forma loss of $36 million year-on-year.
The decline was due to a 10.8 percent decrease in comp-store sales across all retail formats, said the company, partially offset by an increase in the total number of Sears in operation combined with strong home services sales.
For the nine months, Sears Domestic revenue hit $17.1 billion, down from a pro forma $22 billion in the nine months a year ago. Pro forma revenue for the current nine months was $21.3 million.
Operating income for the segment in the period reached $313 million, compared with a pro forma loss in the first nine months of 2004 of $159 million.
Sears Holdings, the merged business of both Sears and Kmart, reported total fiscal third-quarter revenue climbed to $12.2 billion in the quarter ended Oct. 29, up 176 percent from $4.4 billion in the year-ago period prior to Kmart’s purchase of Sears to form Sears Holdings. However, pro forma revenue for last year’s third quarter was $12.8 billion.
The revenue increase was primarily attributable to the addition of Sears revenue of $8 billion, partially offset by a $300 million, or 5.7 percent, decline in Kmart revenue.
Net income at Sears Holdings for the three months came in at $58 million, compared with $552 million in the prior-year period. Pro forma net income for the same quarter in 2004 was $150 million. During the current quarter, the company recorded $59 million in restructuring charges.
Gross margin in the quarter was 27.5 percent, compared with 24.9 percent for the same period last year. The increase was primarily attributable to the addition of Sears, which had a higher overall gross margin rate than Kmart in the current year period, partially offset by a decrease in Kmart’s gross margin.