Sears, Roebuck and Co., Hoffman Estates, IL, announced a solid second quarter yesterday with net income of $309 million for the period ended June 28, up from $229 million in the second quarter of 2002.
Yet the company lowered its forecast for the year given ongoing weakness at its retail stores and lower revenue from the credit card division it agreed to sell this week to Citigroup for $6 billion. Under the deal, Citigroup will acquire the MasterCard issuing business of Sears and its store label accounts.
The earnings included a pretax gain of $93 million on the sale of $2.5 billion worth of previously charged-off credit card accounts, which was partially offset by a pretax charge of $28 million for severance costs.
However, Retail and Related Services reported operating income of $183 million compared with $300 million for second-quarter 2002, with the falloff attributed to lower gross margins on full-line store sales due to clearance activity and a highly promotional retail environment.
Revenue reached $7.8 billion, up 0.9 percent from the same period last year. A revenue increase from the addition of Lands' End, which was acquired in June 2002, was offset by revenue decreases in retail stores. Comparable-store sales for the quarter dropped 3.5 percent. In hardlines, lawn and garden experienced strong performances in full-line and dealer stores.
Second-quarter domestic Credit and Financial Products revenue fell about 4.2 percent from a year ago to $1.27 billion.
Domestic credit card receivables at the end of the second quarter rose 4.2 percent over the prior year to $29.4 billion. The domestic provision for uncollectible credit card accounts was $446 million, compared with $693 million in last year's period, a drop of $247 million due mainly to a $300 million charge taken in second-quarter 2002.
Year-over-year delinquencies increased to 7.41 percent from 6.87 percent.