Despite a slight slippage in sales, Sears Holdings Corp. (Hoffman Estates, Ill.) reported that net income gained 26.5 percent for the fourth quarter ended Feb. 3, 2007.
The company said its improved results reflected increased operating income at both Kmart and Sears domestic, driven primarily by improved margin rate performance, most notably within apparel. The full year results also improved on the basis of strong second half margin performance within apparel, as well as improved expense management across all of the company's segments: Kmart, Sears domestic and Sears Canada.
“We are making progress as evidenced by our improved financial performance in fiscal 2006, but recognize we still have much work to do,” said president and ceo Aylwin Lewis. “Our improved apparel results are an indication of what can happen when we enhance our offerings and services to better meet customers' needs.
“We believe that actions taken in 2006 to put the right culture and infrastructure in place will provide opportunities for us to expand our successes in 2007 and help us realize our company vision to improve the lives of our customers by providing quality services, products and solutions that earn their trust and build lifetime relationships.”
For the quarter, domestic same-store sales declined 3.1 percent, with Sears domestic comparable store sales declining 4.9 percent and Kmart comparable store sales declining 0.9 percent.
For the year, domestic comparable store sales declined 3.7 percent, with Sears domestic comparable store sales declining 6.1 percent and Kmart comparable store sales declining 0.6 percent. The company explained that the comparable store sales declines at both Kmart and Sears domestic “reflect the impact of increased competition and lower transaction volumes.” At Kmart, despite continued pressure from competitor expansion, comparable store sales declined only modestly for both the quarter and year. The decline at Kmart occurred across a number of categories, partially offset by increases within apparel and pharmacy.
At Sears domestic, comparable store sales declined for both the quarter and year across most categories and formats, partially offset by increases in women's apparel, reflecting what the company believes are improved assortments in this business relative to last year. In 2005, Sears domestic modified its apparel assortment to a more “fashion forward” offering, which was not successful and led to significant sales declines within Sears domestic's apparel business during the second half of fiscal 2005. During the fourth quarter, the company experienced a sales decline in its home appliance business as a result of the slower U.S. housing market and increased competition.