Sears Turns Profit, But Sales Lower

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Hoffman Estates, Ill. - Sears Holdings turned a profit during its fiscal first quarter based on sales of stores, but revenue was lower with major appliances and CE sharing the blame.

Net income in the first quarter, ended April 28, was $189 million, compared with a net loss of $165 million during the prior year's first quarter.

This year's fiscal first quarter included gains on the sale of assets of $233 million, after tax and non-controlling interest, from the sale of certain U.S. and Canadian stores and leasehold interests. These transactions generated approximately $440 million of cash proceeds.

Revenues decreased $270 million to $9.3 billion for the quarter ended April 28, 2012. The decline in revenue was primarily due to the effect of having fewer Kmart and Sears full-line stores in operation, lower domestic comp-store sales for the quarter and a decline in Sears Canada's comp-stores sales for the quarter. First-quarter 2012 revenues included a decrease of $21 million due to changes in foreign currency exchange.

Domestic comp-store sales declined 1.3 percent, comprised of declines of 1 percent at Sears Domestic and 1.6 percent at Kmart. Sears Domestic experienced an overall decrease in comp-store sales, the company said, and there were declines in major appliance and CE sales.

And Sears Canada's comp-store sales declined 6.3 percent. The company is planning a partial spin-off of its interest in Sears Canada to shareholders, announced separately today, which would bring the ownership of SCC by Sears Holdings to 51 percent when complete.

Operating income was $315 million for the quarter, compared to an operating loss of $172 million for the prior year's first quarter. The improvement in operating income of $487 million includes gains on sales of assets, which were partially offset by the impact of charges related to store closures and severance and other significant items. Excluding these items, operating income improved $155 million, primarily due to the improvement in gross margin and the reduction in selling and administrative expenses.


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