Apr 11, 2002 By Dave Carpenter Ap Business Writer 3 min read

CHICAGO (AP) – Shares in Sears, Roebuck and Co. surged Wednesday after the retailer reported preliminary first-quarter profits far exceeding Wall Street’s estimates. While describing sales as still “soft,” Sears said estimated operating earnings for the quarter more than doubled from a year ago thanks to improved profit margins and lower operating costs.

It pegged earnings, excluding non-comparable items, at 93 cents a share – up from 45 cents in the first quarter of 2001 and well above analysts’ consensus estimate of 61 cents, according to Thomson Financial/First Call.

Full earnings will be reported April 18.

Sears’ latest results – including a 4 percent decline in same-store sales from a year ago – make clear that the $41 billion-a-year company has yet to shake out of its long retail slump.

Net earnings for the quarter will still fall well short of last year’s when all charges are tallied, including $208 million, or 64 cents a share, due to the adoption of new accounting standards, and $40 million for converting Eaton’s stores to Sears Canada stores. Sears’ estimated net earnings were 34 cents per share, down 64 percent from the first quarter a year ago.

In addition, while adding 31 cents a share onto anticipated first-quarter earnings, Sears boosted its full-year earnings estimate by just 14 cents a share over the previous estimate – suggesting a scaling back for the rest of the year.

Investors nonetheless embraced the positive short-term news.

Sears’ stock jumped $2.80, or 5.5 percent, to $54 a share in afternoon trading on the New York Stock Exchange – flirting with the four-year high of $54.29 after earlier rising to $55. Shares in the Hoffman Estates, Ill.-based company fell as low as $29.90 last September in the aftermath of the terrorist attacks.

The early buying frenzy cooled somewhat after Standard & Poor’s issued a statement saying that “it is too early to project this as a sustainable trend” in view of the uncertain economic outlook and the risk inherent in overhauling its full-line stores.

Chairman and chief executive Alan Lacy said he was particularly pleased with the improved retail earnings, which he said demonstrate the initial success of recent strategic initiatives.

“While revenues continue to be soft, our focus on gross margin, inventory levels and operating expenses is driving substantial profit improvement,” he said.

The retail and related services segment improved operating earnings by more than $140 million from last year, Sears said. The credit and financial products business also enjoyed a strong quarter with an expected earnings increase of about 20 percent.

“Sears is in the midst of a turnaround, and their turnaround is far from complete,” said retail industry consultant Kurt Barnard. “But they’re well on their way.”

He said Lacy has come to the realization that the traditional department-store model doesn’t work any more, and is “trying to create a shopping-mall alternative to the free-standing discount store and companies like Kohl’s.”