NEW YORK – Sears, Roebuck and Co. (S) on Thursday said quarterly profit fell sharply compared with a year earlier, when the department store operator had a gain from the sale of its credit card business, but the profit topped forecasts as the retailer slashed costs.
The company, which is being bought by Kmart Holdings Corp. (KMRT), said fourth-quarter profit fell to $378 million, or $1.76 a share, from $2.75 billion, or $10.84 a share, a year earlier.
Analysts on average forecast $1.66 a share, according to Reuters Estimates.
The year-ago quarter included a gain of $4.1 billion, or $10.38 per share, from the sale of its credit card business.
The company's profit beat Wall Street expectations because of its strong cost-cutting program, which Chairman and Chief Executive Alan Lacy has been trying to implement for years, said Bill Dreher, retail analyst at Deutsche Bank.
"We believe there are sustainable legs to the cost reduction," said Dreher, who has a "buy" rating on the company's stock. "It's something we've been looking forward to for a long time. It's been a little bit slower in coming than we would have liked to see, but we're pleased to see it arrive in the fourth quarter."
Sears' total costs and expenses fell 12.2 percent to $10.62 billion in the quarter.
Total revenue fell 8.4 percent to $11.23 billion compared with the 2003 fourth quarter, which included results from the credit card and National Tire and Battery (search) businesses, which were sold in that quarter. The 2003 quarter also had 14 weeks, compared with 13 weeks in 2004.
Sales at U.S. stores open for at least a year, a key measure of retail performance, were down 0.2 percent, dragged down by weak sales in December.
Hoffman Estates, Illinois-based Sears, which has been battling to reverse years of falling sales, agreed to be bought by Kmart in November. The deal will form the third-largest U.S. retailer by sales.
Shares of Sears were up 17 cents at $50.07, off an earlier high at $50.60, on the New York Stock Exchange (search).