Sears Holdings' profit down 50% in Q1
Sears Holdings experienced a 50% plummet in net income for the first quarter of 2010, decreasing from $34 million in the year-ago period to $17 million in profit this quarter. However, the retailer did experience a 1.2% increase in its US comparable store sales and 1.7% increase at Kmart for the first quarter, which ended May 1.
Net income attributable to Sears Holdings' shareholders fell 38% year-over-year to $16 million for the quarter.
The retailer's overall revenues for the quarter were flat at $10 billion, hurt in part by the closing of 63 Kmart and Sears stores. Operating income for the period ending May 1 declined to $98 million, down from $128 million in 2009. Home appliances, apparel, home and toy categories assisted sales, while food, tools and home electronic categories were down. It did not break out results from its Lands' End division.
In its Q1 earnings report released May 20, Sears Holding cites the company's drop in operating income the result of a decline in its gross margin rate of 40 basis points, precipitated by a “reduction in selling and administrative expenses of $18 million.” However, the company stated that these expenses were comparably lower than the $36 million costs incurred for Sears' continued investment in multichannel and ShopYourWay rewards program.
According to research analysts at Credit Suisse who track the fiscal performance of Sears, its Q1 earnings, in comparison to its direct competitors, was “disappointing.”
“This was the quarter of the government appliance stimulus, of much better and earlier weather, and of improving consumer confidence,” wrote the analysts in a report released May 20 appraising Sears' Q1 earnings. For Sears, not being able to show improvement with these factors at work is “worrisome.”
In addition to noting Kmart's increase in store sales, Sears Holdings Corp's Interim CEO and president W. Bruce Johnson said in a public statement that the company had been experiencing momentum from having partnered with state agencies to sell energy-efficient appliances.