Sears Holdings Corp.'s fourth-quarter net income fell 13 percent, but adjusted results topped Wall Street's expectations thanks to continued strengthening at its Kmart stores.
Fixing the long-running weakness at Sears will be the challenge for new CEO and President Lou D'Ambrosio, named to the post Wednesday.
The retailer led by billionaire Edward Lampert reported Thursday that it earned $374 million, or $3.43 per share, for the period ended Jan. 29. That compares with $430 million, or $3.74 per share, a year earlier.
Adjusted earnings were $3.67 per share, beating the $3.60 per share that analysts surveyed by FactSet predicted.
Revenue dipped 1 percent to $13.14 billion mostly because of fewer stores and lower revenue at stores open at least a year. But the performance still managed to top Wall Street's $13.02 billion.
The performance is not that much of a surprise for the retailer, as last month Sears signaled that it expected to post fourth-quarter numbers that would be better than what Wall Street analysts had forecast. It is the company's first profit since the first quarter.
Nevertheless, in a letter to investors Thursday, Lampert said Sears' financial results "remain at unacceptable levels."
Late Wednesday, Sears named technology industry executive D'Ambrosio as its new chief, ending a three-year search that began after its last CEO resigned amid sales and profit slumps.
For the past six months, D'Ambrosio has worked as a consultant to Sears' board. He takes the reins from interim CEO W. Bruce Johnson, who held that post for about three years. Johnson replaced Aylwin Lewis, who stepped down in February 2008.
In his letter, Lampert said D'Ambrosio, who previously worked at Avaya and IBM, was the right fit because of his "information and technology background, leadership style and experience in leading and transforming a Fortune 500 company."
In the fourth quarter, revenue at stores open at least a year fell 1.2 percent, pulled down by a 4.5 percent drop-off at Sears. More than half of the decline was because of consumer electronics, a category where prices have fallen sharply.
Sears stores also had soft clothing sales, but results were mostly hurt by weakness in its hardline categories, which include hardware, housewares, automotive, electronics, sporting goods, toys and health and beauty items.
Revenue at stores open at least a year rose 2.5 percent for Kmart. The chain reported strong sales of jewelry, clothing, toys, footwear and sporting goods but experienced weakness in its foods, consumables and pharmacy categories.
Revenue at stores open at least a year is a key gauge of a retailer's health because it measures results at existing stores instead of newly opened ones.
Sears has more than 4,000 stores in the U.S. and Canada. It is controlled by Lampert, who acquired Kmart out of bankruptcy in 2003 and later bought Sears, Roebuck & Co. to form Sears Holdings.
Lampert rarely speaks publicly about the company of which he is chairman. But twice a year — once at a shareholder meeting each spring and once in a letter to investors — he offers up his thoughts on a wide range of topics.
In Thursday's letter, Lampert said the retailer has significant cash that can be invested in the company.
He said Kmart's business was stabilizing and becoming more responsive to customers' needs, while Sears — which is known for its home appliances — has been hurt by weak sales of big-ticket items and products linked to housing and consumer credit.
For the year, Sears earned $133 million, or $1.19 per share. This was off 43 percent from $235 million, or $1.99 per share, in the prior year.
Adjusted earnings fell to $2.07 per share from $3.19 per share.
Annual revenue declined 2 percent to $43.33 billion from $44.04 billion.
Full-year revenue at stores open at least a year fell 1.6 percent, with Kmart posting a 0.7 percent increase and Sears reporting a 3.6 percent decline.
- Edward Lampert