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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:








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