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Sears Reports First-Quarter 2001 Net Income Of $176 Million

Sears, Roebuck and Co. (NYSE: S) reported first-quarter 2001 net income of $176 million or $0.53 per share, compared with 2000 first-quarter net income of $235 million or $0.65 per share, a decrease of 18.5 percent on a per share basis. Revenues for the quarter were $8.86 billion compared with $8.93 billion in the first quarter of last year.

"In the first quarter, the credit business performed in line with expectations, reflecting continued strong portfolio quality," said Chairman and Chief Executive Officer Alan J. Lacy. "However, this was another difficult quarter for the retail industry. Our domestic and Canadian retail businesses performed below the company's expectations, with comparable store sales declines in both domestic and Canadian stores. In addition, pressure on margins and higher Canadian expenses also contributed to lower earnings."

Retail and Related Services

Retail and Related Services revenues for the first quarter of 2001 of $6.81 billion were slightly below last year's first quarter revenues of $6.83 billion. Sales increases at The Great Indoors, Sears online business, and hardware stores were offset by declines in full-line stores, commercial sales and automotive stores. "The slowing economy and colder than anticipated weather had an impact on both our hardlines and softlines businesses, as well as our specialty formats," said Lacy. "In hardlines, we experienced strong growth in electronics, home appliances and sporting goods, offset by significant decreases in lawn and garden sales. In softlines, sales increases in home fashions and fine jewelry were offset by lower than anticipated results among the other softlines categories."

Retail and Related Services gross margin rate declined by 70 basis points to 24.3%, reflecting increased promotional markdowns particularly in softlines as well as a balance of sale shift to hardlines products. Selling and administrative spending increased by 1.9 percent versus last year's quarter partly due to investments in The Great Indoors. As a percent of revenue, selling and administrative expenses were 50 basis points higher than last year's first quarter.

Retail and Related Services posted an operating loss of $56 million as compared with operating income of $21 million in the prior year period. The $77 million decline is primarily due to lower than anticipated revenues and pressures on margins and expenses as well as investment in The Great Indoors.

Credit and Financial Products

First-quarter domestic credit and financial products revenues declined 7.6 percent from a year ago, to $1.03 billion. This decline is primarily due to a $1.7 billion reduction in average on-book owned credit card receivables. Revenues on the managed portfolio also declined. While average and ending managed credit card receivable balances were slightly higher than last year, overall portfolio yield declined.

Lower operating expenses and a lower provision for uncollectible accounts largely offset the revenue decline. The continued strength of the receivables portfolio is reflected in the $54 million reduction in net charge-offs and related provision expense for on-book receivables. The net charge-off rate for the managed portfolio declined to 5.07% from 5.69% a year ago. Interest expense and funding rate were relatively flat with last year's quarter.

The domestic allowance for uncollectible accounts decreased to $567 million from $649 million at year-end 2000. The $82 million decrease is related to $2.0 billion of receivables transferred to the securitization Master Trust in the first quarter of 2001. Apart from the effect related to the $2.0 billion securitization, the allowance is unchanged from year-end 2000. As previously announced, the company will record a one-time non-cash pretax charge of approximately $520 million in the second quarter to re- establish an allowance for uncollectible accounts related to approximately $12 billion of previously securitized receivables.

Reported operating income from credit and financial products declined by $9 million or 2.2 percent. First-quarter 2001 operating income includes $40 million of securitization income or 8 cents per share as compared with $19 million or 3 cents per share in the first quarter of 2000.

Sears Canada

Sears Canada revenue increased 2.6 percent to $942 million in the first quarter of 2001. The increase primarily reflects new store openings in 2000, as comparable store sales declined by 0.6%. This comparison with last year's quarter was also adversely affected by a nearly 5 percent decline in the value of the Canadian dollar relative to the U.S. dollar.

The segment reported an operating loss of $10 million, a $28 million decline from last year's quarter. The decline is primarily due to higher selling and administrative spending to support stores opened in 2000, particularly the Eatons banner stores. These increases were partly offset by the absence of spending on Eaton's integration.

Corporate and Other

Revenues from the home services businesses included in the Corporate and Other segment increased by almost 17 percent while profits improved by $6 million. Corporate headquarters spending was even with last year's quarter due to the company's ongoing focus on productivity. The company repurchased 4.3 million shares of Sears common stock during the quarter at a cost of $168 million.

Outlook

"The trends seen in the first quarter are likely to continue through the second quarter," said Lacy. "We are projecting a high-single to low-double digit percentage decline in second-quarter earnings per share excluding non- comparable items and securitization income. We are more optimistic about the second half and are forecasting full-year earnings per share to be in line with last year excluding noncomparable items and net securitization income."

Statements contained under the "Outlook" heading of this release are forward looking statements, based on assumptions about the future, which are subject to risks and uncertainties, such as competitive conditions in retail, changes in consumer confidence, changes in interest rates, delinquency and charge-off trends in the credit card receivables portfolio, the pace of development of new sites for The Great Indoors, consumer acceptance and use of the Sears Gold MasterCard, 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. The company believes its forward looking statements are reasonable but cautions that actual results could differ materially. The company intends these forward looking statements to speak only at the time of this release and does not undertake to revise or confirm them as more information becomes available.

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 across the country through approximately 860 full-line department stores, approximately 2,100 specialized retail locations, and a variety of online offerings accessible through the company's Web site, sears.com. Sears, Roebuck and Co. is the majority owner of Sears Canada Inc.

  SEARS, ROEBUCK AND CO.
  CONSOLIDATED INCOME

                                             For the 13 Weeks Ended
                                        March 31, 2001 and April 1, 2000
  (millions, except earnings per share)     2001       2000       % Change

   Revenues
     Merchandise sales and services        $7,754      $7,738        0.2%
     Credit and financial products
      revenues                              1,103       1,187       -7.1%
        Total revenues                      8,857       8,925       -0.8%

   Costs and expenses
     Cost of sales, buying and occupancy    5,836       5,783        0.9%
     Selling and administrative             2,031       1,989        2.1%
     Depreciation and amortization            215         212        1.4%
     Provision for uncollectible accounts     191         245      -22.0%
     Interest                                 312         316       -1.3%
        Total costs and expenses            8,585       8,545        0.5%

   Operating income                           272         380      -28.4%
   Other income, net                            1           1          -

   Income before income taxes and
    minority interest                         273         381      -28.3%

   Income taxes                               (98)       (140)     -30.0%

   Minority interest                            1          (6)         -

   Net income                                $176        $235      -25.1%


   Earnings per share:
     Basic                                  $0.53       $0.65      -18.5%
     Diluted                                $0.53       $0.65      -18.5%

   Average common and dilutive common
    equivalent shares outstanding           333.5       360.0




  SEARS, ROEBUCK AND CO.
  CONSOLIDATED BALANCE SHEET

        (millions)
                                         March 31,    April 1,     Dec. 30,
                                           2001         2000         2000
        Assets
         Current Assets
          Cash and cash equivalents         $510         $449         $842
          Retained interest in
           transferred credit card
           receivables                     3,863        3,036        3,105
          Credit card receivables,
           net                            14,730       17,049       17,317
          Other receivables                  459          299          506
          Merchandise inventories          6,019        5,738        5,618
          Prepaid expenses and
           deferred charges                  623          553          486
          Deferred income taxes              981          716          920
           Total current assets           27,185       27,840       28,794

         Property and equipment, net       6,499        6,361        6,653
         Deferred income taxes               255          302          174
         Other assets                        967        1,463        1,278
           Total assets                  $34,906      $35,966      $36,899

        Liabilities
         Current liabilities
          Short-term borrowings           $3,412       $3,027       $4,280
          Current portion of long-
           term debt and capitalized
           leases                          2,313        2,444        2,560
          Accounts payable and other
           liabilities                     6,311        6,443        7,336
          Unearned revenues                1,079        1,007        1,058
          Other taxes                        446          420          562
           Total current liabilities      13,561       13,341       15,796

         Long-term debt and
          capitalized leases              11,623       12,614       11,020
         Postretirement benefits           1,913        2,135        1,951
         Minority interest and other
          liabilities                      1,362        1,362        1,363
           Total liabilities              28,459       29,452       30,130

        Commitments and Contingent
         Liabilities

        Shareholders' Equity
         Common shares                       323          323          323
         Capital in excess of par
          value                            3,528        3,549        3,538
         Retained income                   7,079        6,105        6,979
         Treasury stock - at cost         (3,862)      (3,053)      (3,726)
         Deferred ESOP expense               (85)        (126)         (96)
         Accumulated other
          comprehensive loss                (536)        (284)        (249)
           Total shareholders'
            equity                         6,447        6,514        6,769

           Total liabilities and
            shareholders' equity         $34,906      $35,966      $36,899

           Total common shares
            outstanding                    329.8        352.6        333.2


  SEARS, ROEBUCK AND CO.
  SUPPLEMENTAL INFORMATION

  (millions, except number of stores)
                                           For the 13 Weeks Ended
                                      March 31, 2001 and April 1, 2000

                           Retail and Related Services   Corporate and Other
  (millions, except number
   of stores)                 2001    2000   % Change   2001  2000  % Change

  Total Revenues            $6,806  $6,826     -0.3%    $84    $72  16.7%

  Costs and expenses
     Cost of sales, buying
      and occupancy          5,153   5,121      0.6%     37     33  12.1%
     Selling and
      administrative         1,530   1,502      1.9%    100    100   0.0%
     Depreciation and
      amortization             176     179     -1.7%     14     12  16.7%
     Interest                    3       3      0.0%      -      -     -
            Total costs and
             expenses        6,862   6,805      0.8%    151    145   4.1%

  Operating income            $(56)    $21       -     $(67)  $(73)  8.2%


                              Credit and Financial
                                    Products              Sears Canada
  (millions)                  2001    2000   % Change  2001   2000  % Change

  Total Revenues            $1,025  $1,109     -7.6%   $942   $918   2.6%

  Costs and expenses
     Cost of sales, buying
      and occupancy            -       -         -      646    629   2.7%
     Selling and
      administrative           155     170     -8.8%    246    217  13.4%
     Depreciation and
      amortization               5       4     25.0%     20     17  17.6%
     Provision for
      uncollectible
      accounts                 181     235    -23.0%     10     10   0.0%
     Interest                  279     286     -2.4%     30     27  11.1%
            Total costs and
             expenses          620     695    -10.8%    952    900   5.8%

  Operating income            $405    $414     -2.2%   $(10)   $18    -


                                   March 31,  April 1,
                                     2001      2000

     Domestic inventories  -LIFO    $5,328    $5,102
                           -FIFO    $5,906    $5,710


                                 For the 13 Weeks Ended
                            March 31, 2001 and April 1, 2000

     Pretax LIFO charge                $12       $12



                                 December 30,              March 31,
     Domestic retail
      stores:                         2000    Opened  Closed  2001

       Full-line stores                863         1     (4)   860
       Specialty formats             2,158         6    (37) 2,127
               Total                 3,021         7    (41) 2,987

       Gross square feet             147.3       0.1   (1.4) 146.0



  SEARS, ROEBUCK AND CO.
  SUPPLEMENTAL INFORMATION - DOMESTIC CREDIT CARD RECEIVABLES
  (millions)

  The following credit information relates to the domestic managed
  portfolio of credit card receivables which is comprised of on-book
  credit card receivables, credit card receivables underlying retained
  interest securities and securities which have been sold to third parties.
  The effective financing rate is based on both domestic on-book debt of
  the company and securitization interest of the Sears Master Trust.


                                  For the 13 Weeks ended
                             March 31, 2001 and April 1, 2000
                                      2001         2000
  Average domestic credit card
   receivables:
     Managed credit card
      receivables                   $26,340       $26,094
     Securitized balances sold       (7,816)       (6,443)
     Retained interest in
      transferred
       credit card receivables       (3,638)       (3,106)
     Owned credit card
      receivables                   $14,886       $16,545


                                    March 31,     April 1,
                                       2001         2000
  Ending domestic credit card
   receivables:
     Managed credit card
      receivables                   $25,699       $25,451
     Securitized balances sold       (8,143)       (6,301)
     Retained interest in
      transferred
       credit card receivables       (3,863)       (3,036)
     Other receivables                   95           107
     Owned credit card
      receivables                   $13,788       $16,221


                                     For the 13 Weeks ended
                               March 31, 2001 and April 1, 2000
  Domestic managed credit card
   receivables-                       2001          2000
  Net interest margin:
  Portfolio yield                    19.13%        20.29%
  Effective financing rate            6.06%         5.93%
  Net interest margin                13.07%        14.36%

  Domestic managed net charge-
   off rate                           5.07%         5.69%

                                      2001                    2000
                                Mar. 31, Dec. 30, Sep. 30,  July 1,  Apr. 1,
                                  2001     2000     2000     2000     2000

  Domestic managed credit card
   receivables-
  Delinquency rate               7.50%     7.56%    7.47%   7.15%    7.20%

  Allowance for uncollectible
   accounts                       $567      $649     $624    $725     $725

  Allowance % of domestic
   owned credit card receivables  4.14%     4.03%    4.18%   4.46%    4.48%



  SEARS, ROEBUCK AND CO.
  SECURITIZATION ACCOUNTING
  QUARTERLY IMPACT INCLUDED IN REPORTED RESULTS

  Note: Adding numbers shown below to reported results eliminates the impact
  of securitization accounting included in the previously reported results.
  (millions)


                                      Qtr 1   Qtr 2   Qtr 3  Qtr 4
  Quarter ended March 31, 2001        2001    2001    2001    2001  2001 YTD

  Total revenues                       $275      $-      $-      $-    $275

    Selling and administrative           39       0       0       0      39
    Provision for uncollectible
     accounts                           153       0       0       0     153
    Interest                            123       0       0       0     123
            Total costs and expenses    315       0       0       0     315

  Operating income                      (40)      0       0       0     (40)

  Net income                           $(26)     $-      $-      $-    $(26)

  EPS - Diluted
    Reported                         $(0.08)     $-      $-      $-   (0.08)
    Excluding non-comp items         $(0.08)     $-      $-      $-   (0.08)
     shares o/s                       333.5       -       -       -   333.5


  Year Ended December 30, 2000        Qtr 1   Qtr 2   Qtr 3   Qtr 4
                                      2000    2000    2000    2000  2000 YTD

  Total revenues                       $252    $212    $255    $250    $969

    Selling and administrative           32      32      34      37     135
    Provision for uncollectible
     accounts                           136     115     137     134     522
    Interest                            103     102     110     125     440
            Total costs and expenses    271     249     281     296   1,097

  Operating income                      (19)    (37)    (26)    (46)   (128)

  Net income                           $(12)   $(23)   $(17)   $(30)   $(82)

  EPS - Diluted
    Reported                         $(0.03) $(0.06) $(0.05) $(0.09) $(0.24)
    Excluding non-comp items         $(0.03) $(0.06) $(0.05) $(0.09) $(0.24)
     shares o/s                       360.0   348.4   341.8   334.9   346.3

SOURCE: Sears, Roebuck & Co.

Contact: Janice R. Drummond of Sears, 847-286-8316

Website:








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