Sears expects to boost earnings

Retailer counting on credit-card and services units

February 18, 1999|By BLOOMBERG NEWS

HOFFMAN ESTATES, Ill. -- Sears, Roebuck & Co., the second-largest U.S. retailer, said yesterday that it expects to get per-share earnings back to a double-digit growth rate this year, led by its credit-card and services business.

Separately, Sears said it plans to begin selling major appliances on the Internet in the spring. It will sell 2,000 kinds of appliances, along with replacement parts and related services.

The company's "Softer Side of Sears" advertising campaign is being evaluated. The campaign won't necessarily disappear but will probably "morph into something else," said Chairman and Chief Executive Officer Arthur C. Martinez.

Sears' advertising agencies, Young and Rubicam and Ogilvy and Mather, have been told to come up with new ideas, said Sears marketing chief Mark Cohen.

The company also said it might expand its Great Indoors chain -- which features home-improvement goods and home decor -- to about 60 stores in the next four to five years, based on the success of the test model in a Denver suburb. The stores are designed for women who want to do home-improvement and home-decorating projects.

Sears shares fell $1.625 to $39.625 yesterday. They have lost about 26 percent of their value in the past year. Earnings will increase in the low double-digit percentage range, executives said at a meeting with analysts. Sales at stores open at least a year will rise at a low single-digit rate, they said, as Sears boosts clothing sales with some price cuts and better marketing. And it will offer incentives to use its credit cards.

Sears is "committed to resumption of double-digit earnings growth," Martinez said at the meeting, held at Sears headquarters in this Chicago suburb.

Sears is expected to earn $3.67 a share for the year, the average estimate of analysts polled by First Call Corp. That would be an increase of 11 percent from the $3.32 earned in 1998.

Earnings are expected to rise in Sears's credit business even as revenue and accounts receivable decline, executives said. Services, which include house siding and pest treatment, also are expected to produce higher profits, as is the international unit.

Sears said credit-card incentives to be introduced this year because a growing number of customers are paying cash for merchandise.

About 80 percent of capital spending this year will go to its stores, Sears said.

Martinez said that in response to increased pressure from big discounters, the company will cut prices for 15 percent to 20 percent of its apparel lines.

Pub Date: 2/18/99

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