Sears Holdings Corp. expects its fourth-quarter and full-year adjusted earnings to top Wall Street's expectations as better sales at its Kmart chain cushioned the blow from declines at Sears stores.
The results would be welcome at the struggling retailer, which saw its third-quarter loss nearly double in part because of weak appliance and clothing sales at Sears stores. Shares of the company led by billionaire financier Edward Lampert rose $4.40, or 6.2 percent, to $75 in premarket trading.
The company, which runs Sears and Kmart, predicted on Tuesday that earnings for the year ending Jan. 29 will be between $1.16 and $1.88 per share. Analysts surveyed by FactSet expected lower earnings of 88 cents per share.
For the fourth quarter, Sears expects adjusted earnings of $3.39 to $4.12 per share. That would beat analysts' $3.12 per share estimate.
The outlooks exclude one-time items such as store closings and impairment charges.
Sears, based in Hoffman Estates, Ill., said revenue at stores open at least a year dipped 1.7 percent in December. This figure is a key gauge of a retailer's health because it excludes sales at stores that opened or closed in the past year.
The December results of retailers were closely watched because they included the crucial holiday selling period.
Sears, whose proprietary brands include Diehard, Craftsmen and Kenmore, was expected to face tough competition in December from rivals including Target Corp. and Wal-Mart Stores Inc.
Results for Sears domestic stores dropped 6 percent during the month, while Kmart reported a 2.3 percent increase.
For the quarter to date, revenue at stores open at least a year dipped 1.1 percent, with results at Sears domestic locations off 5.3 percent. Sears quarter-to-date results were hurt by soft sales of consumer electronics, appliances and tools. Among the better performing categories were footwear, jewelry and automotive.
Quarter-to-date results at Kmart climbed 3.4 percent, benefiting from its layaway program as well as strength in toys, home, sporting goods, clothing and shoes. Weaker categories included pharmacy and groceries.
Kmart is facing stiffer competition from Target, which has expanded into fresh food in its general merchandise stores. Wal-Mart has also been adding back thousands of grocery items to its stores.
In the third quarter, Sears Holdings posted a 4.8 percent drop in revenue at stores open at least a year.
Year-to-date revenue at stores open at least a year declined 1.6 percent, again pressured by Sears domestic stores, which fell 3.8 percent. Kmart edged up 0.8 percent for the period.
Sears is not in dire financial straits, as it anticipates ending the fiscal year with cash balances of about $1.1 billion, up from $806 million as of Oct. 30.
Sears plans to report its fourth-quarter and full-year results on Feb. 24. The company has about 3,900 full-line and specialty retail stores in the U.S. and Canada.
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