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Sears 4th Qtr. Net Up From Depressed Year-Ago; Hugo Hits Allstate Results

February 5, 1990

CHICAGO (AP) _ Sears, Roebuck and Co. on Monday reported its fourth-quarter earnings rose sharply from a year earlier, when it undertook a costly restructuring, and said Hurricane Hugo and the Bay Quake made 1989 the costliest year ever for its Allstate insurance subsidiary.

Results from Sears’ merchandise group, its biggest business, rose sharply in a performance that several retailing analysts said was better than they had expected.

Sears reported net income of $602.1 million, or $1.76 per common share, for the three months ended Dec. 31 compared with $117.4 million, or 32 cents per share, for the same period a year earlier.

Sales for the quarter rose 4.2 percent to $15.2 billion from $14.6 billion, Chicago-based Sears said in a statement.

Results for the fourth quarter of 1988 included an after-tax charge of $442 million for restructuring of the company’s retailing business and a loss of $78.9 million from the sale of Allstate Insurance Co.’s life and health insurance operations.

For all of 1989, Sears reported net income of $1.51 billion, or $4.30 per share, compared with $1.45 billion, or $3.84 per share, in 1988. Annual revenue rose 7.1 percent to a record $53.8 billion from $50.3 billion in 1988, Sears said.

″The company is well-positioned as it enters the 1990s and we expect momentum to build as the year progresses,″ Chairman Edward A. Brennan said in a statement accompanying the earnings.

Last year, Sears overhauled its retailing operation, the world’s largest, by cutting costs and introducing ″everyday low pricing″ in hopes of reversing slippage in its market share to both general merchandise discounters such as K mart and Wal-Mart and to ″superstores″ specializing in appliances, electronics or automotive products.

The effectiveness of the strategy has been questioned since its debut last March but analysts said the fourth-quarter results indicated the retailing unit may be shaping up after a shakeout.

The merchandise group reported fourth-quarter income of $368.6 million on sales of $9.6 billion compared with a loss of $113.5 million on sales of $9.5 billion in 1988. The 1988 period included a $442 million after-tax restructuring charge.

The fourth quarter 1989 results included a $26 million after-tax gain from an accounting change, compared with a $26.4 million after-tax charge in 1988 for the same accounting change.

″Generally speaking, they are making progress,″ said retail analyst Monroe Greenstein, of the investment firm Bear, Stearns & Co.

He said the merchandise unit was getting a better grip on expenses and that its gross profit margin was wider than many observers had expected, due partly to the mix of goods Sears is offering.

Retail analyst Edward Weller of Montgomery Securities Inc. also said the results of the merchandise group were better than he had expected.

Allstate reported fourth-quarter income of $245.4 million on revenue of $4.2 billion, compared with $206.3 million on revenue of $3.8 billion in fourth quarter 1988.

Sears said natural disasters last year, including Hurricane Hugo, the northern California quake and severe cold weather in the South, resulted in historically high catastrophic damage claims against Allstate but would not reveal the dollar amount of the claims.

Sears earlier had pegged claims stemming from Hurricane Hugo alone at more than $250 million.

The Dean Witter financial services group reported fourth-quarter income of $48.4 million on revenue of $1.1 billion, compared with operating profit of $26.3 million on revenue of $958.7 million a year earlier.

The Coldwell Banker real estate group reported fourth-quarter income of $15.3 million on revenue of $362.6 million compared with income of $61.9 million on revenue of $377.4 million a year earlier.

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