Earnings rise slightly at Kmart, steeply at Toys 'R Us


Reflecting weak confidence among bargain-hunters and affluent shoppers alike, Kmart Corp., the nation's second-largest retailer, reported a limp 3.1 percent increase in second-quarter earnings yesterday, and Tiffany & Co. reported a 45.8 percent plunge in earnings.

But Toys 'R Us, which sells more than 25 percent of the toys in America, defied the depressing trend in retail earnings in the second quarter, when its profits skyrocketed 39.7 percent.

Kmart, which operates Kmart discount stores as well as several specialty retail chains, said its earnings rose to $168 million, or 37 cents a share, from $163 million, or 40 cents a share, during the similar period last year. Earnings per share were diluted by the greater number of shares outstanding at the end of this year's second quarter.

Sales at Kmart, the second-largest retailer, after Wal-Mart Stores Inc., increased 8.8 percent, to $9.14 billion, from $8.40 billion in the second quarter of 1991.

Wall Street analyst's estimates of Kmart's second-quarter earnings ranged from 37 cents a share to 42 cents a share, with a mean of 40 cents a share, according to Bloomberg Business News.

Joseph E. Antonini, chairman and chief executive of Kmart, said cautious spending patterns and colder-than-normal weather that stymied sales of apparel and gardening equipment had hampered the company's performance.

Kmart's strongest sales came in July, when the weather was warmer, but July typically is a highly promotional month, used by retailers to clear out spring and summer merchandise. Consequently, the company's profit margins in the second quarter slipped 1 percent, to 23.9 percent of sales.

Some analysts expressed concern over the faltering pace of sales and profits from Kmart's PACE Membership Warehouse stores, which contributed 2 percent of the company's overall profits in 1991. Although PACE did better than its competitors in the warehouse industry, with a 10.9 percent increase in sales at stores open at least one year, its sales were below plan in the second quarter, Mr. Antonini said.

Daniel D. Barry, a retail analyst at Merrill Lynch & Co., said the warehouse unit's poor performance may hurt Kmart's stock price, which has been supported largely by speculation that the company might spin off some of its specialty units.

Mr. Antonini has complained that the value of the specialty stores, which include Builders Square, Waldenbooks and Payless Drug Stores, is undermined by the discount store's performance.

Tiffany's net income dived to $3.9 million, or 25 cents a share, from $7.2 million, or 46 cents a share, in 1991, which was worse than most analysts had expected. Sales for the quarter that ended July 31 rose to $120.8 million from $119.4 million a year earlier.

William R. Chaney, Tiffany's chairman, said the company continued to struggle against weak economic and retail conditions. Its costs also increased 11.5 percent as it continues an expansion of stores throughout the nation.

Toys 'R Us lifted its profits to $32.7 million, or 11 cents a share, during the quarter that ended Aug. 1, from $23.4 million, or 8 cents a share, last year. Sales grew 18 percent, to $1.3 billion.

Analysts' estimates of the company's second-quarter earnings ranged from 9 cents a share to 12 cents a share, according to Bloomberg Business News.

Charles Lazarus, chairman and chief executive of Toys 'R' Us, said the outstanding growth in earnings reflected greater sales of classic toys like board games and baby dolls, which give the company higher profit margins and require less advertising and promotion than "hot" toys like video games. He said the company benefited from strong sales in its European stores and improving sales in its Canadian stores.


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