Sears, Roebuck and Co. reported a large drop in first-quarter earnings Thursday as one-time charges battered its bottom line and shoppers spent fewer dollars in its stores.
The Hoffman Estates-based retailer reported net income of $110 million, or 34 cents a share, down 37 percent from $176 million, or 53 cents a share, a year earlier.
The decline resulted from after-tax charges totaling $190 million, or 59 cents a share, primarily related to accounting changes for goodwill.
Without those unusual items, Sears’ profit more than doubled to $300 million, or 93 cents a share, consistent with the retailer’s forecast issued last week, which sent Sears’ stock soaring to a four-year high.
Investors weren’t quite as enthusiastic when they saw the full report. After declining almost $1 per share in early trading, Sears’ stock closed up 4 cents a share to $53.75.
Sears Chief Executive Alan Lacy said the quarter provided evidence that his strategic initiatives were paying off, including reducing salaried store personnel, exiting unprofitable merchandise lines and trimming inventories.
“This is an exceptional quarter,” he said in a conference call.
Sears managed to eke out a 2 percent increase in revenue as a 26 percentincrease in its credit card proceeds surpassed a slight drop-off in merchandise sales and services. Total revenue rose to $9.04 billion from $8.86 billion last year.
Despite a volatile employment market, the outlook for Sears’ $27 billion credit card portfolio is “stable,” said Paul Liska, Sears’ chief financial officer. But Sears increased its bad debt provision by $37 million, or 11 percent, in the first quarter. The company also wrote off 5.4 percent of its receivables as uncollectible, up from 5.1 percent last year, because of a spike in customer bankruptcy filings.
Sears said it still expects 2002 operating earnings to beat last year’s by 17 percent, but Lacy warned other changes will cause “significant disruption” in stores later this year.
More than 800 Sears stores are being retrofitted with centralized cash registers at exits. And Sears will be installing closet shops and big-and-tall men’s shops in more than 300 stores this fall.
Sears will clear space by getting rid of eight private-label clothing lines, Lacy said, and a new in-house brand, whose name hasn’t been revealed, will debut this fall in men’s, women’s and children’s apparel.
In other earnings news:
– Increased demand for Baxter International Inc.’s blood-clotting drug helped boost the company’s net income 56 percent in the first quarter, the Deerfield-based medical products-maker said.
Net income rose to $253 million, or 41 cents a share, from $162 million, or 27 cents a share, a year earlier, when the company took a one-time charge of $52 million, or 8 cents a share, for an accounting change.
Revenue rose 11 percent, to $1.95 billion from $1.76 billion.
The results met Wall Street’s expectations, and Baxter said it was well-positioned to achieve earnings-per-share growth in the midteens. Shares of Baxter rose $1.45, or 2.6 percent, to $57.95 on the news.
In comparison with other pharmaceutical companies suffering from poor results these days, Baxter is doing well because its blood-clotting drug, Recombinant Factor VIII, doesn’t face the typical competitive pressures.
Baxter spends little on marketing its Recombinant Factor VIII and doesn’t have to worry about patent expirations because it is complicated and costly to manufacture. The drug requires high-tech facilities that cost hundreds of millions of dollars and take years to construct.
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The drug, which generates some $800 million in annual sales, is also tapping into a world market where only 25 percent of hemophilia patients receive adequate treatment.
“When you are in a market where you sell everything you make, you don’t spend a lot on marketing,” Baxter CEO Harry Kraemer said in an interview.
Sales in Baxter’s bioscience division, which makes Recombinant Factor VIII, vaccines and other treatments, jumped 18 percent, to $746 million. Sales of medication-delivery devices rose 10 percent, to $739 million, while sales in the company’s renal division were up 2 percent, to $465 million.
– Electronic components-maker Molex Inc., slammed by dismal conditions in the telecommunications sector it serves, said fiscal third-quarter earnings tumbled 68 percent on a nearly one-third drop in sales.
For the quarter ended March 31, the Lisle-based company said net income was $19.7 million, or 10 cents a share, down sharply from the year-earlier $60.7 million, or 31 cents a share.
Revenue fell 32 percent, to $408.3 million from $599.8 million. The economic environment remained “challenging” in the latest quarter, Molex CEO Joe King said, but he said the company believes fiscal third-quarter results “reflect the bottom of the recession for Molex.”
– Fortune Brands Inc. reported a 37 percent increase in first-quarter net income, reflecting strong sales of home and hardware products and lower interest expenses.
The Lincolnshire-based consumer-products conglomerate said net income was $84 million, or 55 cents a diluted share, compared with $61.5 million, or 39 cents a share, a year earlier. Revenue was flat at $1.2 billion.
The results include an after-tax charge of $2.2 million, or 1 cent a share, related to the restructuring of the company’s office-products unit. Fortune Brands also had an 8-cent gain from an accounting adjustment related to goodwill.
Interest expense was cut nearly in half to $16.8 million, reflecting reduced debt levels.
The company said second-quarter profit will be at the high end of a previously forecast range of 78 to 83 cents a share.
Fortune Brands’ shares lost 87 cents, to $52.04, on the NYSE.
Fiscal second-quarter net income for Andrew Corp. dropped 60 percent, to $3.3 million, or 4 cents a share, from $8.2 million, or 10 cents a share, a year earlier.
The results, which came after the close of regular Nasdaq stock market trading, fell short of analyst expectations by a penny a share. During trading, Andrew shares fell 4.6 percent, or 81 cents, to $16.94.
Sales for the Orland Park-based maker of antennas, cables and other equipment for the wireless communications industry fell 16 percent, to $199.7 million from $239.1 million.
For the six months, net income fell 36 percent, to $18.6 million, or 23 cents a share, from $29.1 million, or 36 cents a share. Revenue fell 19 percent, to $423.2 million from $523.2 million.
– Corn Products International Inc. said a trade-related dispute with Mexico and economic turmoil in Argentina hurt first-quarter earnings.
The Bedford Park-based maker of corn sweeteners and industrial food ingredients said net income fell 12 percent, to $11.2 million, or 31 cents a diluted share, from $12.7 million, or 36 cents a share, a year earlier. The company recorded a one-time gain for asset sales and a one-time charge from workforce reductions; excluding special items, earnings fell 35 percent, to $8.2 million or 23 cents a share, matching Wall Street estimates.
Corn Products shares slipped 7 cents, to $31.95.
Sales declined 5 percent, to $431.9 million from $454.6 million.
Corn Products said profits came under pressure in the latest quarter because of a special tax Mexico imposed Jan. 1 on soft drinks containing high-fructose corn syrup. The tax, designed to encourage Mexican soft-drink bottlers to sweeten their product with Mexican sugar instead of U.S. corn syrup, was suspended March 5.
Sales in Mexico haven’t fully recovered since the tax was temporarily rescinded last month, Corn Products said; Argentina’s currency devaluation also hurt the latest period’s profits.
– Nicor Inc. said first-quarter net income rose 3 percent, to $39.9 million, or 90 cents a diluted share, from $38.8 million, or 85 cents a diluted share, a year earlier.
The results, released late Wednesday, exceeded Wall Street estimates of 84 cents a share, and Nicor shares rose 1.3 percent, to $48.10 on Thursday.
Because of the warmer than normal winter, revenue for the Naperville-based natural gas distribution company fell 58 percent, to $617 million from $1.47 billion.