Sears, Roebuck and Co. warned investors yesterday that third-quarter profits would fall short of Wall Street’s expectations.
Third quarter 2002 earnings per share are expected to be in the range of 80 cents to 82 cents, versus earning per share of 80 cents in the same quarter one year ago, Sears CEO Alan Lacy said during a conference call. Analysts had been expecting 86 cents a share, according to news reports.
The company also revised guidance for its principal business segments. In its retail and related services segment, the company expects comparable earnings increases in the low-to-mid 30% range, an improvement from earlier guidance in the mid-to-upper 20% range, Lacy said.
However, in the financial products segment, primarily the credit-card business, comparable earnings increases were revised downward from the low double-digits to the mid-single-digit percent range. The credit card business is one of Sears’ most important businesses, contributing more than 60% of operating income, Lacy said.
Third-quarter receivables in the credit business continue to grow, increasing by about 10% over last year. But allowances for uncollected accounts increased by 10%, a refection of both the growth in the receivables portfolio and the worsening economic outlook, Lacy said. The firm expects a further increase in uncollected accounts in the fourth quarter.
The firm also reaffirmed its 2002 full-year outlook for a 22% increase in comparable earnings to $5.15, in line with expectations announced earlier this year, Lacy said.
The firm’s stock price dipped about 5% on the news to $32.53 yesterday afternoon, down from nearly $60 in June.
In a related development, the company has announced a number of organizational changes.
It has named its CFO, Paul Liska, as executive vice president and president of its credit card division. Liska replaces Kevin Keleghan who resigned Friday at Lacy’s request.
Lacy said the company does not typically comment on personnel dismissals. However, due to the sensitive nature of the current environment in corporate America and the importance of the credit business to Sears, he said “Kevin left at my request. I had lost confidence in his personal credibility. His departure was not related to business performance and does not indicate a change in credit strategy.”
Glenn Richter was promoted to fill the CFO position.
Janine Bousquette was named to the newly created position of executive vice president and chief customer and marketing officer. The appointment takes effect Nov. 1. David Selby, senior vice president of marketing, will leave the company Oct. 15.
Lacy said the firm was in the midst of one of the most significant periods of change in history and that more organizational changes would be required. Sears acquired Lands’ End Inc. in May for $1.9 billion. Sears plans to introduce Lands’ End products next month in retail stores.
Sears will report its third-quarter earnings Oct. 17.
Network
