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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: marginmike who wrote (197436)	10/14/2002 5:44:31 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 436258

Dots are starting to get connected on everyone's favorite retailer/credit disaster-in-waiting, Sears: biz.yahoo.com Reuters Business Report Sears Investors Want Answers Sunday October 13, 3:06 pm ET By Emily Kaiser CHICAGO (Reuters) - Retailer Sears, Roebuck and Co. (NYSE:S - News), its stock near a two-year low after a profit warning and surprise management change, faces tough questions about its slumping credit card business at an analyst meeting on Thursday, fund managers and analysts said. Sears warned on third-quarter profits on Monday, saying its credit card business had set aside more money to account for people unable to pay bills. That threw the spotlight on the business, which contributed some 61 percent of Hoffman Estates, Illinois-based Sears' second-quarter profits, and raised new questions about the retailer's sometimes lenient credit policies and long repayment periods that analysts said could skew delinquency data. At the same time, Chief Executive Officer Alan Lacy said on a conference call with analysts and reporters he had fired the head of the credit unit because he "lost confidence in his personal credibility," an unusually blunt statement that left investors wondering what really happened. "You don't run a consumer lending company that needs constant access to financial markets, fire the guy who runs the business and say it was a matter of credibility," said one fund manager and Sears shareholder who declined to be named. "If you're going to say that you have to say more than that. They've got this meeting next week and I'd say it's a pretty important meeting for the company. I'd like to hear a lot more disclosure on what is inside their credit business," he said, adding that he hadn't planned to attend the meeting but probably would now because of the credit questions. He is not alone in focusing on credit. Sears changed the agenda of Thursday's meeting to allow more time for questions in the morning rather than touring a new store as originally planned, said Sears spokeswoman Peggy Palter. "We felt the interest wasn't as much in the store as it was in the other business issues," she said. "We really wanted to get those business issues addressed because that is obviously where most of those analyst questions lie." BUY NOW, PAY LATER Consumer credit is a growing issue for retailers as a slumping U.S. economy raises questions about bill payments, and with more firms offering easy terms to entice shoppers, analysts say it may be a bigger problem down the road. Bernstein Research raised questions about Sears' credit policies, noting the company waits longer than rival Target Corp. (NYSE:TGT - News) before writing off an unpaid credit account. "Sears has a 240-day delinquency period compared to 180 for Target. The longer period results in an understated charge-off ratio and larger number of active accounts that will likely be charged off," analyst Emme Kozloff said in a research note. Kozloff said Sears' "zero-pay" financing deals, which allow consumer with good credit to pay nothing for 12 months on bigger ticket items, added to the concerns. "This program adds an additional 360 days to the delinquency period since it is impossible for an account under this offer to go delinquent without any payment obligation to begin with," Kozloff said. No-pay programs are becoming increasingly popular as retailers -- from clothing to consumer electronics to autos -- try to lure cost-conscious shoppers in a sluggish economy. Auto maker General Motors Corp. (NYSE:GM - News) said on Thursday it would offer zero down payment, zero payments for 90 days and zero-percent financing on the sale of most new vehicles. Lehman Brothers on Friday raised similar concerns about consumer electronics retailer Circuit City Stores Inc. (NYSE:CC - News). "In an effort to drive traffic, combined with 12-month zero percent financing promotions, we remain concerned Circuit City is possibly lowering its credit standards and potentially increasing its exposure to bad loans," Lehman said. Sears credit quality concerns were reflected in this week's stock and corporate note activity. Its shares hit a two-year low on Thursday but closed up $2.81, or 9.4 percent at $32.72 on the New York Stock Exchange on Friday. Traders said Sears' 7 percent notes maturing in 2011 late Thursday yielded about 7.28 percent, or 3.62 percentage points more than 10-year Treasuries. The gap was about 1 percentage point narrower on Monday, which suggests that investors see more credit risk. (With additional reporting by Jonathan Stempel in New York) Not news to anyone here, but nice to see it start to get play in the media. Should be an interesting meeting later this week....