Pension, Benefit Changes Depress Sears' Q1 Results
The Hoffman Estates, IL-based giant posted a net loss before the cumulative effect of a change in accounting principle of $20 million in the quarter ended April 3 compared with net income of $192 million in first-quarter 2003.
The 2003 quarterly results include the results of the domestic Credit and Financial Products and National Tire & Battery businesses divested in the fourth quarter of 2003.
However, 2004 first-quarter results include a one-time, non-cash, after-tax charge of $839 million. The charge is for the cumulative effect of a change in accounting principle related to the company's pension and post-retirement medical benefit plans.
The net loss after the cumulative effect of the accounting change was $859 million for first-quarter 2004.
Total revenue fell to $7.79 billion from $8.88 billion.
The company's domestic segment reported an operating loss of $39 million for the quarter compared with operating income of $299 million in first-quarter 2003. The prior-year results included operating income of $399 million and $6 million, respectively, from the divested domestic Credit and Financial Products and National Tire & Battery operations.
Merchandise sales and services revenue in the quarter reached $6.8 billion compared with $6.7 billion in the prior-year period, which included $100 million from the National Tire & Battery business. The company said increases in several full-line store home group categories, along with about $33 million earned through its alliance with Citigroup, contributed to the increase.
Overall, domestic comparable-store sales rose 1.6 percent in the first quarter. In the home group, strong growth in lawn and garden and tool sectors along with home electronics was partly offset by comparable-store sales declines in apparel, Sears said.
Also, Sears Canada posted an operating loss of $2 million in the first quarter compared with operating income of $10 million in first-quarter 2003. This was due mainly to a $12 million charge recorded within selling and administrative expenses in first-quarter 2004 related to the decision to license Sears Canada's Auto Centers to three tire retailers and other restructuring activities.