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Sears profits go into free fall

Janet Babin Nov 29, 2007
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Sears profits go into free fall

Janet Babin Nov 29, 2007
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TEXT OF STORY

KAI RYSSDAL: A couple of items from the Marketplace Desk of Useless Economic Indicators to get us into the rest of the day’s news. The Commerce Department reported this morning the economy grew at a pace of almost 5 percent July through September. The dates there are important. The third quarter was before the worst of the subprime crisis hit. Also, today we learned once again that home prices are plummeting. Last month they took their biggest percentage drop in almost 40 years. Amid all of that Wall Street’s hanging on by its fingernails, and corporate earnings are walking even more of a tight rope. Sears announced today profits were down 99 percent.

Marketplace’s Janet Babin fills us in from North Carolina Public Radio.


JANET BABIN: Sears blamed its earnings free fall on a warm October that depressed winter wear sales. Increased competition didn’t help either. But the company admitted it has a lot to improve on. Several chains expect same-store sales to be weak over the holidays. But Milken Institute fellow Jim Barth says not every company’s in the same boat as Sears.

JIM BARTH: Nordstrom’s is positive. Wal-Mart’s positive. Radio Shack, you can look at Eastman Kodak, Goodyear, Amazon and all their earnings are up.

Their numbers might be behind the market’s recent exuberance. Economist Mark Zandi though is not so sure. He says investor hopes that the Federal Reserve might lower interest rates again pushed shares up yesterday. But Zandi calls the recent up-tick a relief rally that won’t last.

MARK ZANDI: They’ll be days when the market does well, but I think there’ll be more bad days than good over the next couple weeks, few months. The economy is struggling. Profits are now beginning to fall, and I think stocks prices are going to reflect that.

Zandi thinks a recession’s likely next year, and he says if it does happen most of us would feel it. Unless we’re really rich our salaries would stagnate, and so would our spending power. But many economists are a lot more bullish. Milken’s Jim Barth says just talking doom and gloom about the markets can be a self-fulfilling prophecy.

BARTH: It does no good to always see the negative sides of things.

Barth says the job market’s steady, and the export market is up 20 percent in the third quarter — both bright spots that could keep the economy going.

I’m Janet Babin for Marketplace.

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