Losses incurred by Allstate Insurance because of the California earthquake and severe winter weather in the rest of the country caused its parent Sears, Roebuck and Co. Thursday to report a loss for the first quarter.
Sears lost $97.9 million, or 27 cents a share, compared with earnings of $317 million, or 82 cents a share, a year earlier. The year-earlier figure excluded earnings of $118.0 million, or 31 cents a share from discontinued operations.
It was the third time in two years that Sears has reported a quarterly loss. The company reported losses for the third quarter of 1992 because of catatrophic losses from Hurricane Andrew, and in the fourth quarter of that year when the company took nearly $4 billion in accounting charges to pay for the closure of its historic catalog business and hundreds of stores.
On news of the latest loss, Wall Street analysts moved quickly to revise their earnings estimates.
“I’ve knocked 47 cents off my estimate,” said Richard Nelson Jr., retail analyst for Chicago-based Duff & Phelps Inc. “I’m at $3.75 (a share) for the year now.”
Nelson’s new estimate, which mirrored the estimates of many other analysts, is more than 60 cents a share lower than the earnings per share Sears reported last year. The company said it earned $4.36 a share last year.
Nonetheless, Sears stock was up $1.25 at $47.38 at midsession on the strength of the performance of the Merchandise Group. Allstate stock was off 12 cents at $22.87.
Sears is the nation’s third largest retailer, following Wal-Mart Stores and K mart.
Merchandise Group earnings for the quarter more than doubled to $129.5 million from $63.6 million a year earlier, helped by double digit sales increases for the last year.
The earnings, however, were more than offset by the losses incurred by Allstate, $220.5 million after discounting the 20 percent of Allstate that Sears doesn’t own.
Sears’ Allstate Insurance Group unit estimated catastrophic losses of $1.11 billion, mainly from the earthquake in January and bad winter weather. On Wednesday, Allstate raised its estimate of losses from the California earthquake to $950 million from $600 million.
“Catatrophes are something you wish wouldn’t happen. But that’s the business we’re in,” said Edward A. Brennan, Sears chairman and chief exeuctive officer.
“I think the thing that pleases us the most with the Merchandise Group is the revenue growth, expense controls and margins performed well in the first quarter. Another thing we’re pleased about is business across all product lines and across the country.
“Business was particularly good in California,” said Brennan, noting that the earthquake which hurt Allstate is benefitting the Merchandise Group. “People are buying products to repair or replace damaged things.”
