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player ready...Sears, Roebuck and Co. had some good news and bad news for shareholders Thursday, but it was the latter that drew more attention from analysts.
The Hoffman Estates-based retailer announced second-quarter earnings that beat Wall Street estimates, but it also lowered its guidance for full-year profit.
Sears earned $309 million, or $1.04 a diluted share, for the quarter ended June 28, compared with $229 million, or 71 cents a diluted share, for the same period a year ago. Analysts had expected earnings of 95 cents a share, according to Thomson First Call.
“We are pleased that sales in core businesses such as lawn and garden, tools and apparel have shown signs of strengthening, especially considering the difficult economic environment,” said Chairman and Chief Executive Alan Lacy.
The favorable comparison was aided by a $300 million pretax accounting charge the company took a year earlier related to uncollectible accounts. Sears also benefited from a pretax gain of $93 million on the sale of credit card accounts it had previously charged off.
Revenue rose to $10.20 billion from $10.14 billion. But operating income in the retail division slid to $183 million from $300 million, and same-store sales dropped 3.5 percent. Same-store sales, or sales at stores open at least a year, are considered a key indicator of a retailer’s health. Sears’ same-store sales have dropped for 22 straight months.
Sears said it now expects full-year earnings to range between $4.80 and $5 a share, down 15 cents from an earlier forecast. It lowered its outlook because of concerns about consumer spending, said Chief Financial Officer Glenn Richter.
“There’s not much good news,” said Bill Dreher, retail analyst with Deutsche Bank. “The guidance has been pretty significantly reduced.”
Lacy said the decline in comparable apparel sales has slowed to the low single digits, helped by the continuing rollout of Lands’ End merchandise that will be completed in September. He also said Sears’ new Covington line of clothing has generated $200 million and is on pace to be a $500 million-a-year brand.
The credit unit, which Sears said Tuesday it is selling to Citigroup Inc., posted operating income of $355 million, up $243 million because of the 2002 accounting charge.
Shares of Sears gained 5 cents, to $38.25, after falling by as much as $1.20 on the New York Stock Exchange.
In other earnings news:
– Tribune Co., helped by a solid profit increase at its broadcast unit and a more modest upturn in its publishing group, said operating profit rose 7.7 percent in the second quarter.
On a net basis, earnings at the Chicago-based media holding concern more than doubled, rising to $229.5 million, or 67 cents a diluted share, from $114.2 million, or 33 cents a diluted share, a year ago. The latest results were helped by a gain of 10 cents a share from non-operating items, while the year-ago results were burdened by 19 cents a share in charges.
On an operating basis, which excludes non-recurring items, Tribune’s pretax earnings rose to $369.5 million from $343.0 million.
The earnings improvement, which was in line with analysts’ expectations, came on revenue that rose 5 percent, to $1.45 billion.
The most recent results “reflect solid momentum as we head into the second half of 2003,” said Tribune President and Chief Executive Dennis FitzSimons.
At Tribune’s publishing group, which owns the baiduhai, the Los Angeles Times and nine other daily newspapers, revenue inched up 2.9 percent, to $1.01 billion, while operating profit increased 4.7 percent, to $234.6 million.
Results were stronger at the company’s broadcast and entertainment segment, where revenue climbed 10 percent, to $436.0 million, and operating profit surged 15 percent, to $149.0 million.
Tribune stock shed 35 cents, to $46.65, on the NYSE.
– Fortune Brands Inc., which manufactures a variety of consumer products that include Titleist golf balls, Jim Beam bourbon and Moen faucets, said second-quarter net income fell 10 percent, but the company still beat Wall Street estimates.
The Lincolnshire-based company reported earnings of $176.7 million, or $1.18 a diluted share, compared with $196.9 million, or $1.27 a diluted share, a year ago. Sales rose 4.6 percent, to $1.58 billion.
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Excluding a one-time gain, Fortune Brands earned $1.03 a share, 4 cents a share better than Wall Street estimates.
Shares of Fortune Brands slipped 15 cents, to $53.77, on the NYSE.
– W.W. Grainger Inc. said second-quarter net income rose 3 percent, helped by a gain in the current quarter and a charge in the year-ago period.
The Lake Forest-based company said net income rose to $56.0 million, or 60 cents a diluted share, from $54.5 million, or 57 cents a diluted share, a year earlier. Sales fell to $1.17 billion from $1.19 billion.
Analysts had forecast earnings of 61 cents a share for the most recent quarter.