For the quarter, earnings before interest and income taxes (EBIT) increased 24.6 percent to $979 million, compared with $786 million in the second quarter 2004. The contribution from the company's credit card operations to EBIT was $153 million, an increase of $33 million, or 27.5 percent.
In the second quarter, the company's gross margin rate improved from the prior year, primarily due to higher markup. Favor ability in markdowns and inventory shortage also contributed to the improvement. The company's expense rate was unfavorable to prior year. (Gross margin rate represents sales less cost of sales expressed as a percentage of sales. Expense rate represents selling, general and administrative expenses expressed as a percentage of sales.)
Net interest expense for the quarter decreased $97 million compared with second quarter 2004. Of this year-over-year improvement, $74 million is attributable to a loss on debt repurchase in the second quarter of 2004 and the remaining $23 million reflects lower average funded balances in the current year, resulting from the application of proceeds from the Mervyn's and Marshall Field's sale transactions, partially offset by a higher average portfolio interest rate.
Other Factors
The company's effective income tax rate for continuing operations for the second quarter was 37.9 percent in 2005 compared with 37.8 percent in 2004.
In June 2004, the company announced a $3 billion share repurchaseprogram. Under this program, the company repurchased $80 million of its common stock during the second quarter of 2005, acquiring 1.7 million shares at an average price of $47.42 per share. Program to-date, the company has acquired 39.3 million shares of its common stock at an average price per share of $45.95, reflecting a total investment of approximately $1.81 billion. The company continues to expect that this share repurchase program will be completed within two to three years of its inception.
marketing@alchempro.com
