Sears Expects 2002 EPS to Increase 13 to 15 Percent; Fourth Quarter 2001 Earnings Increase 11 Percent
Sears, Roebuck and Co. (NYSE: S) Chairman and Chief Executive Officer Alan J. Lacy today said the company expects to see earnings per share increase 13 to 15 percent in 2002.
"Our preliminary outlook for 2002 is for comparable earnings per share to increase in the range of 13 to 15 percent," said Lacy. "We anticipate that our retail and related services business will grow operating income at a low double-digit rate, and credit and financial products will grow at a mid single-digit rate. Sears Canada should post improved profitability on a consolidated basis and our corporate and other segment should reflect the significant benefits of our productivity initiatives."
Lacy added that the company ended the year with its domestic retail businesses well positioned for 2002, with inventories down over $500 million from the end of last year.
Fourth Quarter Earnings
The company today reported fourth quarter 2001 net income, excluding non- comparable items, of $657 million, or $2.02 per share, an 11 percent per share increase over the prior year fourth quarter. The increase is due primarily to improved performance in the company's core retail and credit businesses.
"Despite slow holiday sales, our retail and related services profits increased solidly, driven by margin rate improvements across virtually all of our retail formats," said Lacy.
Fourth quarter 2001 was affected by several non-comparable items relating to home office and store operations productivity initiatives, product category exits, and the Exide battery litigation settlement. These non-comparable items resulted in an after-tax charge of $163 million, or $0.50 per share.
Non-comparable items affecting the fourth quarter of 2000 consisted of securitization income, costs related to the closure of under performing stores, and impairment charges related to the Sears Termite and Pest Control business. These non-comparable items, on an after-tax basis, were $167 million, or $0.50 per share.
Reported fourth quarter 2001 net income, including the non-comparable items, was $494 million or $1.52 per share, compared with $442 million, or $1.32 per share in the fourth quarter of 2000.
Retail and Related Services
Retail and related services posted operating income improvement, excluding non-comparable items, of 5.9 percent to $662 million due to margin rate improvements and cost reductions. "We are pleased by our strong profit performance in retail in the fourth quarter. Our initiatives to realign our merchandise offerings, and to improve the productivity of our marketing and inventory investments are clearly yielding results," said Lacy.
Retail and related services revenues for the fourth quarter of 2001 of $9.49 billion were 3.5 percent below last year's fourth quarter revenues of $9.84 billion. Sales increases by The Great Indoors, dealer stores and product repair services were more than offset by declines in revenue from full-line stores. In hardlines, revenue growth was strong in home appliances, big screen and projection TVs, home fitness products and lawn and garden. In softlines, solid home fashions sales were more than offset by weaknesses across all other softline categories.
Retail and related services gross margin rate improved by 40 basis points to 27.9 percent. Full-line hardlines and softlines businesses, and nearly all other retail formats contributed to the margin improvement. The quarter's margin rate was negatively impacted by the LIFO inventory adjustment, which was a credit of $5 million versus a credit of $59 million last year.
Selling and administrative spending was 4.8 percent lower than fourth quarter 2000 due to expense decreases in full-line stores and direct to customer, but was partially offset by higher investment in The Great Indoors. Selling and administrative expenses were 19.0 percent of sales compared with 19.2 percent last year.
Credit and Financial Products
Operating income excluding non-comparable items increased by $86 million or 25.3 percent to $426 million as favorable funding costs and higher revenues offset higher provision expense.
Fourth quarter domestic credit and financial products revenues increased 1.8 percent from a year ago, to $1.33 billion due to higher average receivable balances. Credit receivables at the end of the fourth quarter grew 2.2 percent over the prior year to $27.6 billion.
Funding costs declined by $119 million or 29.5 percent from last year's quarter due to a favorable interest rate environment.
The provision for uncollectible accounts increased by $52 million or 15.3 percent over last year's period. The net charge-off rate for the quarter increased to 5.23 percent from 4.79 percent last year primarily due to increased customer bankruptcy filings over last year. Portfolio quality remains stable with flat year-over-year delinquencies. The domestic allowance for uncollectible accounts of $1.1 billion is flat as a percentage of ending credit receivables.
Sears Canada
Sears Canada's operating income of $87 million compares with operating income of $53 million in last year's quarter. The $34 million profit improvement is primarily related to a favorable comparison to fourth quarter 2000, which included costs related to the integration and relaunch of Eatons. Sears Canada revenue decreased 3.1 percent to $1.3 billion in the fourth quarter of 2001, in part due to a 3.5 percent decline in the value of the Canadian dollar relative to the U.S. dollar.
Corporate and Other
Segment operating loss, excluding non-comparable items, increased to $94 million from $58 million last year primarily due to costs related to various profit improvement initiatives. Revenues from the home improvement services businesses included in the Corporate and Other segment decreased by 21.3 percent to $74 million primarily due to the sale of the Sears Termite and Pest Control business.
The company repurchased 2.7 million shares of Sears common stock during the quarter at a cost of $124 million.
Full-Year Results
Net income, excluding the effect of non-comparable items, was $1.39 billion, or $4.22 per share, compared with $1.46 billion, or $4.21 per share for 2000. Reported full-year 2001 net income was $735 million, or $2.24 per share, versus $1.34 billion or $3.88 per share in 2000.
Forward-Looking Statements
This release contains forward-looking statements, including a 2002 Outlook. These statements are based on assumptions about the future which are subject to risks and uncertainties, such as competitive conditions in retail, the effects of the current economic climate and consumer confidence, changes in interest rates, delinquency and charge-off trends in the credit card receivables portfolio, the successful execution of and customer reactions to the company's strategic initiatives, and normal business uncertainty. In addition, Sears typically earns a disproportionate share of its operating income in the fourth quarter due to seasonal buying patterns, which are difficult to forecast with certainty. While the company believes its forecasts and assumptions are reasonable, it cautions that actual results may differ materially. The company intends the forward-looking statements in this release to speak only as of the time of this release and does not undertake to update or revise these projections as more information becomes available.
About Sears
Sears, Roebuck and Co. is a leading U.S. retailer of apparel, home and automotive products and services, with annual revenue of more than $40 billion. The company serves families in the U.S. through Sears stores nationwide, including approximately 860 full-line stores. Sears also offers a wide variety of online offerings accessible through its Web site, . The company makes available by phone a recorded message on sales performance of its domestic stores. The message is updated weekly and can be heard by calling (847) 286-6111.
SEARS, ROEBUCK AND CO.
CONSOLIDATED INCOME
For the 13 Weeks Ended For the 52 Weeks Ended
December 29, 2001 and December 29, 2001 and
December 30, 2000 December 30, 2000
(millions, except
earnings pershare) 2001 2000 % Change 2001 2000 % Change
Revenues
Merchandise sales
and services $10,841 $11,245 -3.6% $35,843 $36,366 -1.4%
Credit and
financial
products
revenues 1,401 1,129 24.1% 5,235 4,571 14.5%
Total revenues 12,242 12,374 -1.1% 41,078 40,937 0.3%
Costs and expenses
Cost of sales,
buying and
occupancy 7,803 8,126 -4.0% 26,322 26,721 -1.5%
Selling and
administrative 2,408 2,510 -4.1% 8,892 8,807 1.0%
Depreciation and
amortization 214 205 4.4% 863 839 2.9%
Provision for
uncollectible
accounts 415 224 85.3% 1,344 884 52.0%
Provision for
previously
securitized
receivables - - - 522 - -
Interest 321 317 1.3% 1,415 1,248 13.4%
Special charges
and impairments 255 251 1.6% 542 251 115.9%
Total costs
and expenses 11,416 11,633 -1.9% 39,900 38,750 3.0%
Operating income 826 741 11.5% 1,178 2,187 -46.1%
Other income, net 15 29 - 45 36 -
Income before
income taxes and
minority interest 841 770 9.2% 1,223 2,223 -45.0%
Income taxes (331) (300) 10.3% (467) (831) -43.8%
Minority interest (16) (28) -42.9% (21) (49) -57.1%
Net income $494 $442 11.8% $735 $1,343 -45.3%
Earnings per
share:
Basic $1.53 $1.32 15.9% $2.25 $3.89 -42.2%
Diluted $1.52 $1.32 15.2% $2.24 $3.88 -42.3%
Average common and
dilutive common
equivalent shares
outstanding 325.5 334.9 328.5 346.3
SEARS, ROEBUCK AND CO.
Segment Income Statements
(millions)
For the 13 Weeks Ended December 29, 2001 and December 30, 2000
Excluding Non-Comparable Items and Securitization Income
Retail & Related Services Credit & Financial Products
2001 2000 2001 2000
Total Revenues $9,492 $9,835 $1,331 $1,307
Costs and expenses
Cost of sales,
buying and
occupancy 6,844 7,131 - -
Selling and
administrative 1,801 1,892 225 220
Depreciation and
amortization 174 178 4 4
Provision for
uncollectible accounts - - 391 339
Provision for
previously
securitized receivables - - - -
Interest 11 9 285 404
Special charges
and impairments - - - -
Total costs and
expenses 8,830 9,210 905 967
Operating income $662 $625 $426 $340
SEARS, ROEBUCK AND CO.
Segment Income Statements
(millions)
For the 13 Weeks Ended December 29, 2001 and December 30, 2000
Excluding Non-Comparable Items and Securitization Income
Corporate & Other Sears Canada
2001 2000 2001 2000
Total Revenues $74 $94 $1,345 $1,388
Costs and expenses
Cost of sales, buying and
occupancy 28 38 931 943
Selling and administrative 126 100 256 335
Depreciation and amortization 14 14 22 9
Provision for uncollectible
accounts - - 24 19
Provision for previously
securitized receivables - - - -
Interest - - 25 29
Special charges and impairments - - - -
Total costs and expenses 168 152 1,258 1,335
Operating income $(94) $(58) $87 $53
SEARS, ROEBUCK AND CO.
Segment Income Statements
(millions)
For the 13 Weeks Ended December 29, 2001 and December 30, 2000
Excluding Non-Comparable Items and Securitization Income
Total
2001 2000
Total Revenues $12,242 $12,624
Costs and expenses
Cost of sales, buying and
occupancy 7,803 8,112
Selling and administrative 2,408 2,547
Depreciation and amortization 214 205
Provision for uncollectible
accounts 415 358
Provision for previously
securitized receivables - -
Interest 321 442
Special charges and impairments - -
Total costs and expenses 11,161 11,664
Operating income $1,081 $960
Net Income $657 $609
EPS - Diluted $2.02 $1.82
Average shares o/s 325.5 334.9
SEARS, ROEBUCK AND CO.
Segment Income Statements
(millions)
For the 13 Weeks Ended December 29, 2001 and December 30, 2000
Reconciling Items
Securitization Impact Non-comparable items
2001 2000 2001 2000
Total Revenues $- $(250) $- $-
Costs and expenses
Cost of sales, buying and
occupancy - - - 14
Selling and administrative - (37) - -
Depreciation and amortization - - - -
Provision for
uncollectible accounts - (134) - -
Provision for previously
securitized receivables - - - -
Interest - (125) - -
Special charges and
impairments - - 255 251
Total costs and expenses - (296) 255 265
Operating income $- $46 $(255) $(265)
Net Income $- $30 $(163) $(197)
EPS - Diluted $- $0.09 $(0.50) $(0.59)
Average shares o/s 325.5 334.9 325.5 334.9
SEARS, ROEBUCK AND CO.
Segment Income Statements
(millions)
For the 13 Weeks Ended December 29, 2001 and December 30, 2000
Consolidated GAAP
2001 2000
Total Revenues $12,242 $12,374
Costs and expenses
Cost of sales, buying and
occupancy 7,803 8,126
Selling and administrative 2,408 2,510
Depreciation and amortization 214 205
Provision for uncollectible
accounts 415 224
Provision for previously
securitized receivables - -
Interest 321 317
Special charges and impairments 255 251
Total costs and expenses 11,416 11,633
Operating income $826 $741
Net Income $494 $442
EPS - Diluted $1.52 $1.32
Average shares o/s 325.5 334.9
For the 52 Weeks Ended December 29, 2001 and December 30, 2000
Excluding Non-Comparable Items and Securitization Income
Retail & Related Services Credit & Financial Products
2001 2000 2001 2000
Total Revenues $31,434 $32,024 $5,216 $5,247
Costs and expenses
Cost of sales, buying
and occupancy 23,169 23,662 - -
Selling and
administrative 6,628 6,687 833 810
Depreciation and
amortization 704 710 18 16
Provision for
uncollectible accounts - - 1,441 1,358
Provision on
previously securitized
receivables - - - -
Interest 32 25 1,395 1,550
Special charges and
impairments - - - -
Total costs and
expenses 30,533 31,084 3,687 3,734
Operating income $901 $940 $1,529 $1,513
For the 52 Weeks Ended December 29, 2001 and December 30, 2000
Excluding Non-Comparable Items and Securitization Income
Corporate & Other Sears Canada
2001 2000 2001 2000
Total Revenues $378 $353 $4,325 $4,282
Costs and expenses
Cost of sales,
buying and
occupancy 159 144 2,994 2,901
Selling and
administrative 473 407 997 1,038
Depreciation and amortization 58 53 83 60
Provision for uncollectible
accounts - - 56 48
Provision on previously
securitized receivables - - - -
Interest - - 111 113
Special charges
and impairments - - - -
Total costs and expenses 690 604 4,241 4,160
Operating income $(312) $(251) $84 $122
For the 52 Weeks Ended December 29, 2001 and December 30, 2000
Excluding Non-Comparable Items and Securitization Income
Total
2001 2000
Total Revenues $41,353 $41,906
Costs and expenses
Cost of sales, buying and
occupancy 26,322 26,707
Selling and administrative 8,931 8,942
Depreciation and amortization 863 839
Provision for uncollectible accounts 1,497 1,406
Provision on previously securitized
receivables - -
Interest 1,538 1,688
Special charges and impairments - -
Total costs and expenses 39,151 39,582
Operating income $2,202 $2,324
Net Income $1,385 $1,458
EPS - Diluted $4.22 $4.21
Average shares o/s 328.5 346.3
For the 52 Weeks Ended December 29, 2001 and December 30, 2000
Reconciling Items
Securitization Impact Non-comparable
items
2001 2000 2001 2000
Total Revenues $(275) $(969) $- $-
Costs and expenses
Cost of sales, buying and
occupancy - - - 14
Selling and administrative (39) (135) -
Depreciation and amortization - - -
Provision for uncollectible
accounts (153) (522) - -
Provision on previously
securitized receivables - - 522 -
Interest (123) (440) - -
Special charges and
impairments - - 542 251
Total costs and expenses (315) (1,097) 1,064 265
Operating income $40 $128 $(1,064) $(265)
Net Income $26 $82 $(676) $(197)
EPS - Diluted $0.08 $0.24 $(2.06) $(0.57)
Average shares o/s 328.5 346.3 328.5 346.3
For the 52 Weeks Ended December 29, 2001 and December 30, 2000
Consolidated GAAP
2001 2000
Total Revenues $41,078 $40,937
Costs and expenses
Cost of sales, buying and occupancy 26,322 26,721
Selling and administrative 8,892 8,807
Depreciation and amortization 863 839
Provision for uncollectible accounts 1,344 884
Provision on previously securitized
receivables 522 -
Interest 1,415 1,248
Special charges and impairments 542 251
Total costs and expenses 39,900 38,750
Operating income $1,178 $2,187
Net Income $735 $1,343
EPS - Diluted $2.24 $3.88
Average shares o/s 328.5 346.3
SEARS, ROEBUCK AND CO.
SUPPLEMENTAL INFORMATION - DOMESTIC CREDIT CARD RECEIVABLES, INVENTORY
AND STORE COUNT
(millions)
Average Balance
For the 13 Weeks For the 52 Weeks
ended ended
December 29, 2001 December 29, 2001 Ending Balance
and December 30, and December 30, December December
2000 2000 29, 30,
2001 2000 2001 2000 2001 2000
Managed domestic
credit card
receivables $26,754 $26,262 $26,318 $25,830 $27,599 $27,001
For the 13 Weeks For the 52 Weeks
ended ended
December 29, 2001 December 29, 2001
and December 30, and December 30,
2000 2000
Domestic managed
credit card
receivables- 2001 2000 2001 2000
Net interest margin:
Portfolio yield 19.17% 19.22% 19.17% 19.68%
Effective financing
rate 4.21% 6.11% 5.25% 5.96%
Net interest margin 14.96% 13.11% 13.92% 13.72%
Domestic managed net
charge-off rate 5.23% 4.79% 5.32% 5.12%
2001 2000
Dec. 29, Sep. 29, Jun. 30, Mar. 31, Dec. 30,
2001 2001 2001 2001 2000
Domestic managed credit card
receivables-
Delinquency rate 7.58% 7.41% 7.26% 7.50% 7.56%
Allowance for
uncollectible accounts $1,115 $1,089 $1,089 $567 $649
Allowance % of domestic
on-book credit card
receivables 4.04% 4.15% 4.19% 4.14% 4.03%
December 29, December 30,
2001 2000
Domestic
inventories -LIFO $4,372 $4,941
-FIFO $4,962 $5,507
For the 13 Weeks Ended For the 52 Weeks ended
December 29, 2001 December 29, 2001
and December 30, 2000 and December 30, 2000
Pretax LIFO charge
(credit) $(5) $(59) $25 $(29)
December 30, December 29,
2000 Opened Closed 2001
Domestic retail
stores:
Full-line stores 863 13 (9) 867
Specialty formats 2,158 60 (78) 2,140
Total 3,021 73 (87) 3,007
Gross square feet 147.3 3.6 (2.4) 148.5
SEARS, ROEBUCK AND CO.
NON-COMPARABLE ITEMS
(millions, except per share data) Pre-tax Earnings per Share
Year ended December 29, 2001 Qtr 4 2001 2001 Qtr 4 2001
2001
Operating income, excluding non-
comparable items $1,081 $2,202 $2.02 $4.22
Home office and store operations
initiatives 123 123 0.25 0.24
Product category exits 69 69 0.13 0.14
Exide battery litigation settlement 63 63 0.12 0.12
HomeLife closure and other - 205 - 0.39
Exit of cosmetics business - 82 - 0.16
Total special charges and
impairments 255 542 0.50 1.05
Provision for previously
securitized receivables - 522 - 1.01
Net securitization income - (40) - (0.08)
Total non-comparable items 255 1,024 0.50 1.98
As reported $826 $1,178 $1.52 $2.24
(millions, except per share data) Pre-tax Earnings per Share
Year ended December 30, 2000 Qtr 4 2000 2000 Qtr 4 2000 2000
Operating income, excluding
non-comparable items $960 $2,324 $1.82 $4.21
Store closings and staff
reductions 136 136 0.27 0.26
Sears Termite and Pest Control
Impairment 115 115 0.29 0.28
Total special charges and
impairments 251 251 0.56 0.54
Inventory liquidation losses 14 14 0.03 0.03
Net securitization income (46) (128) (0.09) (0.24)
Total non-comparable items 219 137 0.50 0.33
As reported $741 $2,187 $1.32 $3.88
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SOURCE: Sears, Roebuck and Co.
Contact: Peggy A. Palter of Sears, Roebuck and Co., +1-847-286-8361
Website: