Kmart, Gap Look Spiffy in Quarterly Reports

Kmart Corp. and Gap Inc. on Thursday reported better-than-expected fiscal second-quarter earnings as the major retailers returned to the basic fashions favored by their respective mainstay customers and the strong economy boosted sales.

Kmart, the No. 3 discount retailer, said its profit nearly tripled to $93 million, or 19 cents a share, before a charge, 2 cents higher than estimates, as revenue rose 3.4% to $8.12 billion. Sales from stores open at least a year rose 4%.

Gap, the nation’s third-largest apparel retailer, said its net income nearly doubled to $136.9 million, or 34 cents a share, 3 cents higher than estimates, on a 42% climb in revenue to $1.91 billion. Sales at stores open at least a year soared 19% and gained at each division.

Gap, whose chains include Old Navy, GapKids and Banana Republic, has been adding more inventory and widening its selection of basic styles such as T-shirts. Its ads for jeans and khakis featuring celebrities and young people dancing have helped make it the place to shop for those items, analysts said.

Kmart brought back elastic-waisted pants and added more larger-sized clothes to replace the hot pants and tight, cropped shirts shunned by middle-age moms, its primary shoppers. Strong demand for the new fashions helped the retailer avoid the steep markdowns that ate into its profit last year.

At a Glance

Other earnings, excluding one-time gains and charges unless noted:

RETAILING:

* Lands’ End Inc. reported an unexpected loss for the fiscal second-quarter of $61,000, or break-even on a per-share basis, compared with net income of $3.43 million, or 11 cents a diluted share, a year ago. Analyst estimates ranged from earnings of 11 cents to 22 cents. Revenue rose 8.8% to $239.2 million, mostly from its specialty operations, such as tailored women’s clothes, while sales from its core U.S. business and foreign-based operations were relatively flat. The quarter included $1.3 million in income from foreign currency exchange, compared with a loss of about $400,000 a year ago.

* Saks Holdings Inc.’s fiscal second-quarter loss narrowed to $7.29 million, or 11 cents a diluted share, from $8.6 million, or 14 cents, a year ago, matching estimates. The operator of Saks Fifth Avenue upscale department stores said revenue was up 12% to $509.6 million and same-store sales grew 7.4%.

* Staples Inc.’s fiscal second-quarter profit advanced 34% to $33.8 million, or 12 cents a share, a penny higher than estimates, as the office products retailer’s sales surged 24% to $1.48 billion. Same-store sales jumped 14%. Staples, which released its results after the close, said it also kept fixed costs such as advertising and distribution in check by clustering stores in regional markets.

OTHER INDUSTRIES:

* Comcast Corp.’s second-quarter loss widened to $84.8 million, or 25 cents a share, from $14.6 million, or 5 cents, a year ago, because of its investment in a wireless telephone venture, as its main cable television and home shopping businesses reported gains. Revenue rose 12% to $1.32 billion.

* Navistar International Corp. said its fiscal third-quarter earnings rose 43% to $50 million, or 72 cents a diluted share, much better than the 67 cents forecast. Revenue rose 18% to $1.87 billion as shipments of its medium trucks and school buses rose 12% and shipments of heavy trucks grew 16%.

* Pep Boys--Manny, Moe & Jack said its second-quarter profit dropped 40% to $17.7 million, or 29 cents a share, despite a 17.8% surge in sales to $635.3 million. The auto parts and service retailer cited higher costs from its new commercial delivery program, a reduction in volume discounts and lower selling prices.

Bloomberg News and Reuters were used in compiling this report.