Though sales are still straggling at Sears, the company managed to beat earnings estimates for second quarter 2002. The Hoffman Estates, Ill.-based retailer’s total revenues declined 0.4% to $10.1 billion, driven mainly by a 0.9% drop in merchandise sales to $8.8 billion and a 4.6% decline in same-store sales. But Sears still achieved earnings per share of $1.31, ahead of Morgan Stanley’s estimate of $1.11.

How did it happen? "The main drivers behind the performance were continued margin gains in the company’s retail operations stemming from its ongoing repositioning initiatives as well as another solid performance in its credit card operations," said Credit Suisse First Boston analyst Filippe Goossens in a report on Sears’ second quarter earnings. Revenues from credit and financial products increased 3% to $1.4 billion (13.12% of revenues), as Sears continued to attract new members to its Sears Gold MasterCard program.

Hardlines sales were hearty during the quarter, particularly in home appliances, delivering mid single digit comp increases on top of low single digit increases in 2001. "Sears remains optimistic about home appliance sales going into the third quarter. Overall, due to the ongoing repositioning of its full-line stores, we expect same-store sales during the current quarter to be down in the mid to high single digits," Goossens writes.

During its earnings call, Sears management retained an upbeat outlook for the rest of 2002 despite the hazards associated with its ongoing repositioning initiatives and a formidable retail environment.