Safeway profit down 6%
Pleasanton, Calif. — Safeway Inc. posted a drop in quarterly net income amid higher commodity costs.
The chain said fourth-quarter net income fell to $215.6 million from $229.6 million a year earlier.
Total sales increased 6.2% to $13.6 billion. Same-store sales rose 1.5%, excluding fuel.
More comps declines at Sears and Kmart
HOFFMAN ESTATES, Ill.— Sagging sales and declining profits plagued Sears Holdings during the fourth quarter as the company posted a $2.4 billion loss and announced several measures to bolster its balance sheet.
Total company sales during the fourth quarter declined by $518 million to $12.5 billion as same-store sales at Sears domestic stores dropped 4.1%, while Kmart had a comps decline of 2.7%. Comps at Sears Canada stores declined 7.5%. Full-year sales declined by $1.1 billion to $41.6 billion as the company operated fewer stores and experienced same store sales declines throughout the year.
The effect was a massive hit to profitability as the company reported a $2.4 billion loss for the quarter and a $3.1 billion loss for the full year. Despite the drop in profitability, Sears sought to reassure investors that the company has taken appropriate actions to maintain and enhance liquidity. For example, the company highlighted the fact that fourth-quarter operating profits totaled $351 million and it had roughly $3.2 billion in liquidity between a cash balance of $754 million and an untapped credit line of $2.5 billion. In addition, the company said it had reduced inventories by $544 million, reduced expenses by nearly $200 million and would generate revenues of $270 million by selling 11 stores and between $400 and $500 million by separating its Sears Hometown and outlet businesses.
“We are taking immediate actions to address our fourth quarter performance including cost and inventory reductions, honed and targeted marketing, margin actions, and bringing in new talent to strengthen our merchandising and leadership team, like Ron Boire, who was recently named chief merchant and president, Sears and Kmart Formats,” said Lou D’ Ambrosio, Sears Holdings president and CEO. “It’s also important to distinguish between our earnings issue and the strength of our balance sheet, where we have significant assets and liquidity. We are further strengthening the balance sheet by approximately $1 billion through the actions we are announcing today regarding Hometown, Outlet, and Hardware stores, a real estate transaction, and inventory reductions.”
The company also intimated that it was willing to undertake further real estate transactions to generate revenue.
“We have a substantial unencumbered real estate portfolio, well-established stand-alone businesses, including Lands’ End and Sears Canada,” said CFO Rob Schriesheim. “As separately announced today, the currently planned transfer of our Sears Hometown and Outlet businesses and certain hardware stores is expected, under current market conditions and other related factors, to generate approximately $400 million to $500 million in proceeds, which we currently anticipate closing in our fiscal third quarter. In addition, as separately announced, we also expect to close a transaction in our first quarter for the sale of 11 properties, which will generate $270 million in proceeds. These transactions, together with already announced actions to reduce cash invested in our inventory by $350 million, represent $1 billion in capital to supplement our $3.2 billion in existing liquidity.”
While there was a lot of detail in the quarterly release about liquidity, balance sheet moves and adjusted earnings, there was little mention of strategies or initiatives to enhance the competitive position of either Sears or Kmart.
Esprit continues search for North American licensee
Hong Kong — Asian-based apparel retailer Esprit reported Thursday a net profit of $71.6 million for the six months ended December, beating Wall Street estimates.
The retailer said it remains on track to close its directly managed stores in North America by end-March 2012 and will continue to look for a licensing partner.
Esprit had reported earlier it was in the process of closing its stores here and would close all its outlets in North America if it failed to find a partner to take care of the business.