Michael J. Knell
TORONTO — Major furniture and bedding retailer Sears Canada posted improved earnings in the second quarter, although its top line continued to sag.
The multi-channel retailer said total revenues in the 13 weeks ended July 1 dropped 6.2% to C$1.4 billion from C$1.5 billion in the comparable 2012 period. Sears Canada attributed the decrease to the sale of its credit and financial services operations to JP Morgan Chase in the fourth quarter of 2012. Same-store sales dropped 3%.
Net earnings, including non-comparable items, were C$18.1 million, or 17 Canadian cents per share, compared with C$10.9 million, or 10 cents per share, in the comparable quarter last year.
Thanks to lower promotional discounts, a shift in the sales mix to higher-margin categories and channels, and a stronger Canadian dollar, gross margins in the latest quarter increased by 150 basis points, while total expenses were reduced by 14.1%, the company said. Inventory levels fell 2.4%.
Total revenues in the six months came to C$2.6 billion, compared with C$2.8 billion in the comparable period last year, a decrease of 6.8%. Same-store sales were off 2.8%.
Net earnings in the first half, including non-comparable items, were C$6.3 million, or six Canadian cents per share, compared with $24.8 million, or 23 cents per share, in last year’s first six months.
The improved profit picture in the second quarter pushed Sears Canada shares to around C$20, a 52-week high, on the Toronto Stock Exchange, above Sears Holdings’ C$18 per share offer to acquire all outstanding shares of the Canadian company in a deal worth about C$892 million. Sears Holdings, the Chicago-based owner of Sears, Roebuck and Co. and Kmart, long has held a majority stake in Sears Canada and made the offer to minority shareholders earlier this year.
A group of minority shareholders, led by Pershing Square Capital Management, has fought the deal, saying the offer is too low. A complaint has been filed with the Ontario Securities Commission. The OSC held hearings on the complaint earlier this month and is expected to rule in a few weeks.
