Sears’ Credit Card Troubles May Hurt Profit

Sears, Roebuck & Co. customers fell further behind on credit card payments in the fourth quarter, raising concerns the retailer’s earnings may be lower than expected. Hoffman Estates, Ill.-based Sears wrote off 9.23% of $9.6 billion in credit card charges in December, up from 7.61% in August and significantly above the 6.66% industry average, said Amber Eastman, a credit card analyst at Fitch IBCA Inc. Rising delinquencies may prompt Sears to increase its reserve for bad debts to as much as $120 million from $40 million in the third quarter, analysts said. That, coupled with increased holiday promotions in its stores, may make Sears’ fourth-quarter earnings more of a disappointment than Chairman Arthur Martinez warned of in October. Analysts had already cut the average forecast to $1.28 a diluted share from $1.61 in October. Sears shares, which fell 15% since the profit warning, rose 44 cents to $45.63 in trading of 1.06 million on the New York Stock Exchange.