OTTAWA (Reuters) - First-quarter profit at Sears Canada SCC.TO more than quadrupled, Canada’s second-biggest department store chain said on Wednesday, as a big property sale gain more than offset declining same-store sales.
Net earnings grew to C$63.1 million ($63.7 million), or 59 Canadian cents per share, as it recorded a C$37.2 million one-time gain from selling property in Calgary, Alberta.
That compares with a year-earlier profit of C$14.3 million, or 13 Canadian cents a share.
Sears Canada shares climbed more than 6 percent to C$25 on the Toronto Stock Exchange on Wednesday afternoon. The stock last traded at that price in early January.
Excluding unusual items, profit in the 13-week period rose to C$34.8 million, or 33 Canadian cents a share, from C$5 million, or 4 Canadian cents a share.
Operating earnings before interest, tax, depreciation and amortization and unusual items grew to C$83.1 million from C$52.2 million.
Revenue gained 2.9 percent to C$1.254 billion while sales at stores open for at least one year fell 1.9 percent.
“A longer winter with more snow and colder weather in many parts of the country than last year, together with an early Easter, adversely affected sales of seasonal products,” Chief Executive Dene Rogers said in a statement.
“Better management of inventory and solid performances in many non-retail businesses enabled us to deliver a significant improvement in results.”
Additional statutory holidays in the provinces of Ontario and Manitoba also hurt the results of many Canadian retailers, said Desjardins Securities analyst Keith Howlett.
“The Canadian consumer also appears to have reined in discretionary expenditure beginning in the late summer last year,” he wrote in a recent note. “Most retailers agree that Ontario is a particularly challenging market.”
Sears Canada’s real estate could act as a buffer against tough economic conditions. Howlett estimates the value of its real estate assets at more than C$10 per share.
Between January 2007 and February 2008, Sears Canada sold its head office and two department stores in Ontario and Alberta, the analyst wrote. It also sold two joint venture investments in shopping centers in 2007 and has 12 such ventures remaining.
“The company has stated that real estate assets are non-core assets; one can expect additional asset sales as market conditions warrant,” Howlett wrote.
“We consider the shares to be inexpensive, even in the face of stagnant sales. Our view is that management has 12-18 months to rekindle sales growth before profitability will begin to regress.”
It’s the first time Sears Canada has reported a February to April period after changing its fiscal year-end last year to match U.S. parent Sears Holdings Corp SHLD.O. That benefits first-quarter results by including a more-profitable April and excluding the weaker month of January.
Reporting by Susan Taylor; editing by Rob Wilson