Sears Holdings Corp.’s (SHLD) fiscal 2009 fourth-quarter GAAP earnings more than doubled to $430 million from $190 million in the year-ago period. Excluding special items, adjusted earnings per share came in at $3.69 per share, which topped the Zacks Consensus Estimate of $3.54 per share.
The better-than-expected performance was primarily driven by growth in Kmart, improved gross margin and lower overheads. Shares of Sears Holdings have gained more than 1% to $97.09 in pre-market trading on the Nasdaq after the positive news.
Total revenues reduced marginally by 0.2% to $13.2 billion, compared to $13.3 billion in the year-earlier quarter. The decrease was primarily the result of lower same-store sales and fewer stores, partially offset by the favorable impact of foreign currency translations. Total comparable-store sales decreased 2.5% during the quarter, mainly due to a 6.1% decline in Sears Domestic, partially offset by a 1.7% growth in the Kmart.
Sears Domestic division continued to struggle due to the ongoing downturn in the housing industry, which has affected sales of home appliances, lawn and garden, and home electronics. However, the growth in Kmart comps were primarily driven by increased sales in toys and home categories partially offset by a decline in apparel sales.
Sears’ operating income more than doubled to $749 million from $325 million in the year-ago quarter, while operating margin expanded by 320 basis points (bps) to 5.7%. The growth was primarily attributable to a 3.5% increase in gross profit coupled with a 1.2% reduction in selling and administrative expenses. Moreover, operating income also benefited from the absence of a $284 million impairment charge, which existed in the year-ago quarter.
At quarter end, Sears had cash and cash equivalents of $1.7 billion, compared to $1.3 billion in the year-ago period. During the year, the company repurchased 7.1 million shares under its share repurchase program at a total cost of $424 million. As of Jan 30, 2010, the company had remaining authorization to repurchase $581 million of common shares.
Sears further strengthened its balance sheet by reducing total debt obligations during the quarter by $452 million. Total debt outstanding at quarter end was $2.5 billion, compared to $2.9 billion in the year-ago period. The company also reduced its financial commitments as balance under domestic letters of credit decreased to $646 million from $968 million in the year earlier quarter.
The company also announced that it decided to close 27 underperforming stores during the fourth quarter of 2009, and expects to record a charge of $7 million related to the closures in the first-half of fiscal 2010. Sears expects the store closings to be accretive to earnings due to the elimination of negative cash flows.
The Zacks Consensus Estimate, derived from 7 covering analysts, on the company’s earnings for the year ending Jan 2010 is currently pegged at $2.41 per share, which moved up by 8 cents over the past month.
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