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One-Time Items Boost Sears' Profit

Earnings jump 20% despite another slide in sales.

Sears Holdings'


first-quarter profit rose 20%, but the gain was attributable to one-time items that boosted profits amid declining sales at the company's two chains.

The retailer earned $216 million, or $1.40 a share, for the period, up from $180 million, or $1.14 a share, a year earlier. The earnings were in line with Sears' estimate, given earlier this month, for a profit of $1.30 to $1.53 a share.

Excluding several items, such as hurricane recoveries and a gain from a change to Sears Canada benefit plans, earnings were $1.10 a share. That was down from $1.11 a share on a comparable basis a year earlier.

Revenue slipped to $11.7 billion from $12 billion.

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Analysts polled by Thomson Financial projected earnings of $1.22 a share, before items, on revenue of $11.55 billion.

Domestic same-store sales, or sales at stores open at least a year, slid 3.9%. At the Sears chain, same-store sales dropped 3.4%, while the Kmart chain saw comps tumble 4.4%.

Sears Holdings attributed the declines to both increased competition and external factors such as macroeconomic troubles and poor weather.

"In part, our domestic operating results reflect the impact of some of the same challenges being faced by our customers, such as rising energy costs and a slower housing market," said Aylwin Lewis, Sears Holdings' chief executive and president.

"However, as an organization, we need to overcome these factors by better controlling costs and developing innovative solutions that better meet our customers' needs and allow us to generate a more reasonable level of profitability even in the face of such challenges," he added.

The sales slide is just the latest in a series for Sears Holdings. Its chairman, hedge fund manager Ed Lampert, has focused on improving profits by slashing costs and reining in capital spending rather than increasing sales.