The looming dent in Sears, Roebuck and Co.’s profits–first predicted in April when news of its illegal handling of debt collections broke–finally hit Thursday: Sears reported second-quarter earnings were down 57 percent from a year earlier.
Even though Hoffman Estates-based Sears chalked up gains of $91 million for the sale of its 30 percent share of Advantis, a data systems business, and another $35 million from a new accounting method, a hefty after-tax charge of $320 million related to the credit-card debacle damaged the quarterly results.
The country’s No. 2 retailer said it earned $117 million, or 29 cents per share, in the second quarter, ended June 28, down from $274 million, or 67 cents per share, in 1996’s second quarter.
Excluding the one-time items, however, Sears’ operating profit rose to $311 million, or 78 cents per share, ahead of analysts’ forecasts. It was the sixth quarter in a row that Sears has beaten analysts’ estimates.
Revenues rose more than 6 percent, to $9.73 billion from $9.13 billion.
On the plus side, Sears reported good spring business, despite cool weather.
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For the six months, net income fell 30 percent, to $299 million, or 75 cents per share, from $425 million, or $1.03 per share, in the year-earlier period. Revenues increased 8 percent, to $18.49 billion from $17.13 billion.
For the six months, Sears’ adjusted net income–less the second-quarter charges and a first-quarter charge of $36 million relating to the sale of Sears Mexico–increased 15 percent, to $490 million, or $1.23 per share, from $425 million, or $1.03 per share.
Wall Street applauded Sears’ report, with the stock closing at $58.50 a share, up $2 on the New York Stock Exchange.
Sears took the $320 million charge to settle class-action lawsuits and suits by attorneys general in all 50 states relating to agreements with its bankrupt credit card holders that were not filed, as required, with courts from 1979 through April 1.
Under these agreements, Sears will identify debtors affected by Sears’ improper handling of the cases, repay them with interest, write off remaining balances and provide a fund of $25 million to be distributed to debtors participating in the settlement.