Surprise profit launches Sears shares

Surprise profit launches Sears shares
Copyright by The Associated Press
9:40 AM CDT, May 22, 2009
http://www.chicagotribune.com/business/chi-sears-earnings-credit-line-may21,0,5227146.story


Shares of Sears Holdings Corp. are soaring, a day after the retailer surprised investors by posting a first-quarter profit.

Sears shares are up $8.38, or 17 percent, to $58.57 in morning trading Friday.

The parent of Sears and Kmart stores announced late Thursday that its first-quarter profit was $26 million, or 21 cents per share. That was a marked improvement from the year before, when the retailer led by financier Edward Lampert lost $56 million, or 43 cents per share.

Excluding one-time items the company earned $47 million, or 38 cents per share, for the three months that ended May 3. Analysts said that the adjusted per share profit was less than 38 cents, but was still sharply better than the forecast loss of 88 cents per share.

Barclays analyst Robert Drbul told investors the company's results were "significantly better," and he boosted his 2009 and 2010 earnings per share estimates.

Also on Thursday Sears Holdings worked out a deal with banks to extend its closely watched credit facility by two years, but starting in March the line will be worth only $2.4 billion instead of the $4 billion currently, the company said.

The announcement came after the market closed Thursday as Sears reported a first-quarter profit as it cut advertising and payroll costs amid declining sales.

Investors and vendors had been keeping a close eye on Sears' $4 billion credit agreement, due to expire in March 24, 2010.

On Thursday Sears amended the agreement, increasing the credit line to $4.1 billion through March 24. After that, a $2.4 billion credit line will be available through June 2012, the company said.

Sears said the new deal provides it "more than adequate liquidity for standby letters of credit and working capital needs." It also has a so-called accordion feature that allows Sears to use existing collateral to obtain another $1 billion after March 24.

The banks leading the deal include Banc of America Securities LLC, Wells Fargo Retail Finance and GE Capital Markets.

Tribune reporter Sandra M. Jones contributed to this story.