Sears Second-Quarter Income Increases 26% on Strong Sales

Sears, Roebuck & Co. said Thursday that its second-quarter earnings rose 26%, thanks to lower costs and robust sales in both its Sears department stores and its furniture, hardware and other specialty stores.

The nation’s second-largest retailer had net income of $274 million, or 67 cents a share, beating analysts’ 64-cent average estimate. In the year-earlier quarter, profit from continuing operations was $218 million, or 54 cents a share.

Sears is outperforming its competitors because of a strong one-two punch: Its vastly improved apparel business, which has been revamped over the last several years, and its market-leading hard goods business. Indeed, sales in the quarter jumped more than 11% in its Sears stores, and its specialty stores had sales increases of 10% or higher.

“This was a nice, clean quarter, typical of Sears, with strong sales throughout the company and margin improvement beyond what I expected,” said Peter Schaeffer, an analyst at Dillon Read & Co.

Total sales rose 11% to $9.13 billion, and sales at stores open at least a year jumped 9.4%. Gross margin rose to 26.4% of sales from 25.8% of sales. Selling, general and administrative costs narrowed to 21.3% of sales from 21.8% in the year-earlier quarter.

At Sears stores, sales were especially strong in its Brand Central appliances.

Hoffman Estates, Ill.-based Sears is the market leader in just about every appliance category, and its Brand Central category sells more appliances than any other retailer, analysts said. It holds about one-third of the retail appliance market.

The category generates about 13% of the retailer’s total sales and less than 20% of its earnings.

“Brand Central’s performance exceeded expectations largely on the strength of our appliance business,” said Chairman Arthur Martinez, who is largely credited with the firm’s recent revival.