Sears lowers earnings outlook
CHICAGO (AP) – Sears, Roebuck and Co. said Monday the credit-card business that provides a majority of its profit is taking a hit from the worsening economy, and will cause third-quarter results to fall short of expectations. The announcement sent its stock tumbling $5.39, or 14 percent, to $32.25 a share on the New York Stock Exchange. That’s its lowest price since September 2001 and down from nearly $60 in early June.
Sears CEO Alan Lacy said the company was anticipating a challenging quarter as it finishes overhauling its stores nationwide.
But retail results have been better than expected and it’s the economy that has eroded Sears’ earnings, hampering results in the credit and financial products division, which accounts for more than 60 percent of profits.
Sears said it now expects earnings from the quarter ended Sept. 30 to be between 80 cents and 82 cents a share, compared with 80 cents a year earlier.
Analysts surveyed by Thomson First Call had been expecting 86 cents a share.
The threat of a war with Iraq and the West Coast ports lockout also weigh on Sears’ outlook, Lacy said.
Lacy said the company remains on track to meet its full-year earnings target of $5.15 a share because of retail strength that has offset the credit and financial business weaknesses. However, that figure remains below analysts’ estimate of $5.27 a share.
Analysts also voiced dissatisfaction with the fact that Sears did not disclose much specific information Monday.
Lacy said last Friday’s announcement that Kevin Keleghan was being replaced by chief financial officer Paul Liska as head of the retailer’s credit operation had nothing to do with the business.
“Kevin left the company at my request because I lost confidence in his personal credibility,” Lacy said, declining to elaborate. “His departure is not related to business performance and does not indicate a change in our credit strategy.”
Glenn Richter, 40, succeeded Liska as chief financial officer.
Sears has been expanding the credit-card business, which accounts for about two-thirds of the company’s operating income.
Sears reports third-quarter earnings on Oct. 17.
—
On the Net:
http://www.sears.com