Shares of Sears Holdings, which operated Sears and Kmart, rose in early trading today as the retailer said a lower tax rate in its fourth quarter due to the favorable resolution of certain federal and state income tax matters.
Sears Holdings now expects earnings for the year ending Jan. 29 will be between $1.16 and $1.88 per share. Retail analysts’ average estimated had predicted earnings of 88 cents per share. For the fourth quarter, the company expects adjusted earnings of $3.39 to $4.12 per share, also exceeding analysts’ average estimate of $3.12 per share.
Credit Suisse analyst Gary Balter said in a client note that the fourth-quarter guidance is likely being helped by a lower tax rate of 32% compared to a normalized rate of 39%, adding roughly 35 cents on the low end of the guidance range and 42 cents on the high end.
Although an improvement over its third quarter when losses nearly doubled, Search Holdings said its U.S. comparable store sales declined during December mostly due to lower sales in consumer electronics.
‘Kmart was the Outperformer’
Sears reported its same-store sales declined 1.7% in December, including a 6% drop at its U.S. Sears stores that more than offset 2.3% growth at Kmart.
“Kmart was the outperformer of the group with strength in categories such as toys, home, sporting goods, apparel and footwear,” analyst Neil Currie of UBS Securities LLC said today
While more than half of the 5.3% quarter-to-date decline in same-store-sales at its Sears stores apparently was due to sales declines in consumer electronics, appliances and tools footwear, jewelry and automotive categories reported growth.
“Sears domestic is struggling a bit still. They have a lot of appliances, and a lot of home goods, but that stuff lags in a recession and its also housing-related,” said Paul Swinand, a securities analyst at Morningstar.