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Sears Holdings Reports Third Quarter 2012 Results



              Sears Holdings Reports Third Quarter 2012 Results

PR Newswire

HOFFMAN ESTATES, Ill., Nov. 15, 2012

HOFFMAN ESTATES, Ill., Nov. 15, 2012 /PRNewswire/ -- Sears Holdings
Corporation ("Holdings," "we," "us," "our" or the "Company") (NASDAQ: SHLD)
today reported its third quarter 2012 results. In summary, we reported:

  o Adjusted EBITDA increased $34 million for the quarter to a loss of $156
    million in 2012 versus a loss of $190 million in 2011. Domestic Adjusted
    EBITDA increased $18 million (a loss of $164 million in 2012 versus a loss
    of $182 million in 2011). Sears Canada's Adjusted EBITDA improved $16
    million ($8 million in 2012 versus a loss of $8 million in 2011);
  o Net loss from continuing operations attributable to Holdings' shareholders
    for the third quarter of $498 million ($4.70 loss per diluted share) and
    $410 million ($3.85 loss per diluted share), in 2012 and 2011,
    respectively. The third quarter included an effective tax rate of 2.3% in
    2012 versus a benefit rate of 18.0% in 2011;
  o Adjusted loss per diluted share from continuing operations for the third
    quarter of $1.99 in 2012 and $2.55 in 2011;
  o For the quarter, selling and administrative expenses declined $139
    million;
  o Sears Domestic's comparable store sales declined 1.6% in the third quarter
    of 2012, Kmart's comparable store sales declined 4.8%, and Sears Canada's
    comparable store sales declined 5.7%;
  o Continued discipline of our investment in inventory with domestic
    inventory declining $1.4 billion from the prior year balance ($972 million
    excluding the inventory related to the Sears Hometown and Outlet
    businesses); 
  o Completed the separation of Sears Hometown and Outlet Stores, Inc. on
    October 11, 2012 which raised $446.5 million in gross proceeds; and
  o Partial spin-off to our shareholders of 45% of the outstanding common
    shares of Sears Canada closed on November 13, 2012.

Lou D'Ambrosio, Sears Holdings' Chief Executive Officer and President, said,
"For the 3rd quarter and year-to-date, we improved EBITDA, accelerated our
strategic actions and generated significant cash by delivering on the actions
we outlined at our Annual meeting. Our EBITDA improvement in the quarter came
from some of our most important categories like Appliances, Apparel, and Home
Services as we introduced new offers, honed pricing, effectively managed costs
and implemented better inventory management. We did experience shortfalls,
however, in categories like Grocery and Household and Consumer Electronics,
and are taking actions to improve that performance.

We will continue to take the actions necessary to create value and retain the
flexibility to invest in the strategic priorities of our company. We are
rapidly moving to a member based business model. Our investments are focused
on our members and their experience -- at the store, online, and mobile --
which is why we are investing in Integrated Retail and our SHOP YOUR WAY
membership program. Over half of our revenues at Sears Domestic and Kmart now
come from SHOP YOUR WAY membership.

As we commence the holidays, I also want to thank our associates for their
hard work and commitment and for most recently their incredible support to
help the victims of Hurricane Sandy. Associates across Sears Holdings worked
tirelessly to bring essential goods -- from water to blankets to generators -
to the people hit hardest by the storm."

Third Quarter Revenues and Comparable Store Sales

Revenues decreased $548 million to $8.9 billion for the quarter ended
October 27, 2012 compared to the prior year quarter. The decline in revenue
was primarily due to the effect of having fewer Kmart and Sears Full-line
stores in operation and lower domestic comparable store sales for the quarter.
Sears Canada's comparable store sales also decreased and included an increase
of $15 million due to changes in foreign currency exchange rates.

Domestic comparable store sales declined 3.1%, comprised of declines of 1.6%
at Sears Domestic and 4.8% at Kmart.  During the quarter, we saw increased
comparable store sales in our apparel and home appliance categories at Sears
Domestic. These increases were offset by four primary factors. The largest
impact at both Sears Domestic and Kmart was in consumer electronics, which
continues to be negatively impacted by price compression, as well as market
shifts such as moves to smartphone technology and away from digital cameras,
GPS devices, MP3 Players and camcorders in addition to transitions to online
gaming and applications. Adjusting for the decline in consumer electronics,
Sears Domestic comparable store sales were up over the prior year. Grocery and
household declined at Kmart partly due to the intensely competitive nature of
that industry. Lawn and garden declined at Sears Domestic due to strong
preseason sales of snow clean-up product in the third quarter of 2011 as a
result of product shortages during the prior year winter season. Lastly,
pharmacy sales declined at Kmart due to a conversion of brand name drugs to
equivalent generic drugs. Sears Canada's comparable store sales decreased 5.7%
for the quarter primarily due to sales decreases in snow throwers, women's
apparel, electronics, men's apparel and home decor partially offset by
improved performance in home appliances and mattresses.

Operating Loss

Operating loss was $428 million and $447 million for the quarters ended
October 27, 2012 and October 29, 2011, respectively. The improvement in
operating loss of $19 million was primarily due to the reduction in selling
and administrative expenses, which was offset by a decline in gross margin
dollars driven by lower overall sales and a slight decline in margin rate.

For the quarter, our gross margin decreased $141 million to $2.3 billion in
2012, predominately due to the above noted decline in overall sales. Gross
margin included charges of $32 million and $14 million related to store
closures for 2012 and 2011, respectively. In addition, Sears Canada's gross
margin included an increase of $5 million related to the impact of foreign
currency exchange rates.

Sears Canada's gross margin rate improved 220 basis points for the third
quarter as the prior year included activity related to clearing excess
inventory. Sears Domestic's gross margin rate improved 10 basis points during
the third quarter mainly due to improvements in apparel, home appliances and
home services, which were partially offset by declines in consumer
electronics, fine jewelry, lawn and garden, and our Lands' End customer direct
business. These improvements were offset by a 110 basis point decline in
Kmart's gross margin rate during the third quarter as improvements in pharmacy
and apparel were more than offset by declines in consumer electronics and
grocery and household.

Domestic selling and administrative expenses decreased $132 million in the
third quarter of 2012 compared to the third quarter of 2011 predominately due
to decreases in payroll and advertising expenses, which were partially offset
by higher pension expense. Selling and administrative expenses at Sears Canada
for the quarter decreased $7 million compared to the prior year quarter, and
included an increase of $4 million related to the impact of foreign currency
exchange rates. On a Canadian dollar basis, selling and administrative
expenses decreased $11 million primarily due to decreases in advertising and
payroll expenses. Selling and administrative expenses included expenses
related to domestic pension plans, store closings and severance of $48 million
and $28 million for 2012 and 2011, respectively. The third quarter of 2012
also included $7 million of transaction costs associated with strategic
initiatives while the third quarter of 2011 included expense of $9 million
related to hurricane Irene losses.

Operating loss for both the third quarter of 2012 and 2011 included expenses
related to domestic pension plans, store closings and severance which
aggregated to $89 million and $42 million, respectively. Operating loss for
the third quarter of 2012 also included the $7 million of transaction costs
associated with strategic initiatives as well as a gain on sales of assets of
$12 million related to the sale of a store in Texas operated under The Great
Indoors format, while the third quarter of 2011 also included $9 million of
expense related to hurricane Irene losses. See the attached schedule,
"Adjusted Earnings per Share," for a reconciliation from GAAP to as adjusted
amounts, including adjusted earnings per diluted share from continuing
operations.

Our effective tax rate provision was 2.3% for the third quarter of 2012 as
compared to an effective tax benefit rate of 18.0% in 2011. The current year
tax rate was impacted by the establishment of a valuation allowance in 2011
against certain deferred income tax assets and the utilization of part of our
net operating loss deferred tax asset in 2012. In addition, the current year
tax rate reflects the effect of not recognizing the benefit of current period
losses in certain domestic jurisdictions where it is not more likely than not
that such benefits will be realized. The amount of the deferred tax asset
considered realizable, however, could be adjusted in the future if estimates
of future taxable income during the carryforward period are reduced or
increased, or if objective negative evidence in the form of cumulative losses
is no longer present and additional weight may be given to subjective evidence
such as our projections for growth. The third quarter of 2011 included a
non-cash charge of $100 million to establish a valuation allowance against
certain state income deferred tax assets.

Financial Position

Rob Schriesheim, Sears Holdings' Chief Financial Officer, said, "In February,
we laid out a number of actions intended to generate more than $1 billion of
additional liquidity, improve our financial performance and unlock value. We
have executed against these goals, are on track to generate $1.8 billion of
additional liquidity and improved our EBITDA by $271 million through the first
three quarters of this fiscal year as compared to the same period last year.
In addition to generating liquidity, these actions served to de-risk our
operations and balance sheet as we transform the Company to a member-centric
business model that is less asset-intensive. Specifically, we reduced our risk
related to our lease obligations, investment in inventory, fixed cost base, as
well as began the process of settling a portion of our legacy pension
obligations. We intend to continue to be proactive in generating at least $500
million in additional liquidity over the next 12 months through selective
actions that are consistent with our focus on creating long term value. The
exact form and amount will depend on specific circumstances and opportunities,
including market conditions."

We had cash balances of $633 million at October 27, 2012 ($406 million
domestic and $227 million at Sears Canada) as compared to $754 million at
January 28, 2012. The decrease in cash during the first nine months of 2012
was primarily due to uses of cash for contributions to our pension and
post-retirement benefit plans of $493 million, capital expenditures of $257
million, repayments of long-term debt of $247 million and other working
capital needs, partially offset by cash generated from the dividend from and
sale of Sears Hometown and Outlet Stores, Inc. of $447 million and from the
sales of properties of $511 million.

Merchandise inventories at October 27, 2012 were $9.6 billion, as compared to
$10.9 billion at October 29, 2011. Domestic inventory decreased $1.4 billion
to $8.6 billion at October 27, 2012. Excluding the inventory related to the
Sears Hometown and Outlet businesses, domestic inventory decreased $972
million from the prior year third quarter driven by both improved productivity
and store closures. Sears Domestic inventory decreased in all categories, with
the most notable decreases in the home appliances, apparel and consumer
electronics categories. Kmart inventory also decreased in all categories with
the most notable decreases in apparel, consumer electronics and pharmacy and
drug. Sears Canada's inventory levels increased $16 million to $941 million at
October 27, 2012, primarily due to the timing of merchandise receipts.

Total debt (consisting of short-term borrowings, long-term debt and capital
lease obligations) was $4.0 billion at October 27, 2012, compared to $3.5
billion at January 28, 2012 and $4.2 billion at October 29, 2011. Availability
under our credit facilities was approximately $1.4 billion as of October 27,
2012 ($1.0 billion domestic and approximately $0.4 billion at Sears Canada,
after taking into account possible reserves).

On September 14, 2012 the Company voluntarily elected to contribute an
additional $203 million to its domestic pension plan ("Plan") bringing the
Plan to the 80% funded level under applicable law thereby allowing the Plan to
offer lump-sum settlements to former associates who have vested pension
benefits. The Company believes that it is beneficial to settle pension
obligations through lump-sum payments to Plan participants so as to reduce the
Company's exposure to the gross pension obligation (which was $6.1 billion as
reported in the Company's Annual Report on Form 10-K for the fiscal year ended
January 28, 2012). Specific risks of the gross pension obligation that the
Company would expect to be mitigated through settlement of a portion of the
gross pension obligation include:

  o Investment return risk on pension assets;
  o Interest rate risk on pension liabilities;
  o Mortality risk on pension participants; and
  o Regulatory risk from changes in applicable laws and associated fees.

This voluntary offer was made to approximately 86,000 former associates with
vested pension benefits, representing approximately $2.0 billion of the
Company's total qualified pension plan liabilities. Eligible participants will
have until November 19, 2012 to make their election. The Company expects to
make the payments in December 2012 and will fund the payments from existing
pension plan assets. The Company currently estimates that it will incur a
non-cash charge to operations of approximately $300 million to $400 million
pre-tax in the fourth quarter as a result of the requirement to expense the
unrealized actuarial losses. The charge will have no effect on equity because
the unrealized actuarial losses are already recognized in accumulated other
comprehensive income/(loss). Accordingly, the effect on retained earnings will
be offset by a corresponding reduction in accumulated other comprehensive
loss. Actual participation rates and payout amounts will not be known until
December 2012. The Company now estimates that its minimum contribution to its
domestic pension plan for fiscal 2013 will be approximately $350 million.

Adjusted EBITDA

In addition to our net loss determined in accordance with GAAP, for purposes
of evaluating operating performance, we use an Adjusted Earnings Before
Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
measurement.

Adjusted EBITDA is computed as net loss attributable to Sears Holdings
Corporation appearing on the statements of operations excluding income (loss)
attributable to noncontrolling interest, loss from discontinued operations,
net of tax, income tax (expense) benefit, interest expense, interest and
investment income, other income (loss), depreciation and amortization and gain
on sales of assets. In addition, it is adjusted to exclude certain significant
items as set forth below. Our management uses Adjusted EBITDA to evaluate the
operating performance of our businesses, as well as executive compensation
metrics, for comparable periods. Adjusted EBITDA should not be used by
investors or other third parties as the sole basis for formulating investment
decisions as it excludes a number of important cash and non-cash recurring
items.

While Adjusted EBITDA is a non-GAAP measurement, management believes that it
is an important indicator of operating performance because:

  o EBITDA excludes the effects of financing and investing activities by
    eliminating the effects of interest and depreciation costs;
  o Management considers gains/(losses) on the sale of assets to result from
    investing decisions rather than ongoing operations; and
  o Other significant items, while periodically affecting our results, may
    vary significantly from period to period and have a disproportionate
    effect in a given period, which affects the comparability of results.

Adjusted EBITDA was determined as follows:

                            13 Weeks Ended            39 Weeks Ended
                            October 27,  October 29,  October 27,  October 29,
millions
                            2012         2011         2012         2011
Net loss attributable to
SHC per statement of        $   (498)    $   (421)    $   (441)    $   (737)
operations
Income (loss) attributable  —            (4)          4            (6)
to noncontrolling interest
Loss from discontinued      —            11           —            10
operations, net of tax
Income tax expense          11           (91)         53           (264)
(benefit)
Interest expense            68           70           199          216
Interest and investment     (7)          (6)          (28)         (31)
income
Other (income) loss         (2)          (6)          (3)          2
Operating loss              (428)        (447)        (216)        (810)
Depreciation and            211          210          625          641
amortization
Gain on sales of assets     (26)         (4)          (436)        (35)
Before excluded items       (243)        (241)        (27)         (204)
Domestic pension expense    42           19           124          56
Closed store reserve and    38           23           90           65
severance
Transaction costs           7            —            10           —
Hurricane losses            —            9            —            9
Adjusted EBITDA as defined  $   (156)    $   (190)    $   197      $   (74)
% to revenues               (1.8)%       (2.0)%       0.7%         (0.3)%

 

Adjusted EBITDA for our segments was as follows:

                      13 Weeks Ended
                      Adjusted EBITDA           % To Revenues
                      October 27,  October 29,  October 27,  October 29,
millions
                      2012         2011         2012         2011
Kmart                 (101)        (68)         (3.3)%       (2.0)%
Sears Domestic        (63)         (114)        (1.3)%       (2.3)%
Sears Canada          8            (8)          0.8%         (0.7)%
Total Adjusted EBITDA (156)        (190)        (1.8)%       (2.0)%

                      39 Weeks Ended
                      Adjusted EBITDA           % To Revenues
                      October 27,  October 29,  October 27,  October 29,
millions
                      2012         2011         2012         2011
Kmart                 33           14           0.3%         0.1%
Sears Domestic        159          (93)         1.1%         (0.6)%
Sears Canada          5            5            0.2%         0.2%
Total Adjusted EBITDA 197          (74)         0.7%         (0.3)%

 

Forward-Looking Statements

Results are preliminary and unaudited. This press release contains
forward-looking statements about our expectations for the third quarter of
fiscal 2012. Forward-looking statements are subject to risks and uncertainties
that may cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by these forward-looking statements. Such statements are
based upon the current beliefs and expectations of our management and are
subject to significant risks and uncertainties. The following factors, among
others, could cause actual results to differ from those set forth in the
forward-looking statements: our ability to offer merchandise and services that
our customers want, including our proprietary brand products; our ability to
successfully implement initiatives to improve our liquidity through inventory
management and other actions; competitive conditions in the retail and related
services industries; worldwide economic conditions and business uncertainty,
including the availability of consumer and commercial credit, changes in
consumer confidence and spending, the impact of rising fuel prices, and
changes in vendor relationships, including the impact of increases in the cost
of raw materials experienced by certain of our vendors; vendors' lack of
willingness to provide acceptable payment terms or otherwise restricting
financing to purchase inventory or services; the impact of seasonal buying
patterns, including seasonal fluctuations due to weather conditions, which are
difficult to forecast with certainty;  our dependence on sources outside the
United States for significant amounts of our merchandise; our extensive
reliance on computer systems to process transactions, summarize results and
manage our business, which may be subject to disruptions or security breaches;
our reliance on third parties to provide us with services in connection with
the administration of certain aspects of our business; impairment charges for
goodwill and intangible assets or fixed-asset impairment for long-lived
assets; our ability to attract, motivate and retain key executives and other
associates; our ability to protect or preserve the image of our brands; the
outcome of pending and/or future legal proceedings, including product
liability claims and proceedings with respect to which the parties have
reached a preliminary settlement; and the timing and amount of required
pension plan funding; and other risks, uncertainties and factors discussed in
our most recent Annual Report on Form 10-K and other filings with the
Securities and Exchange Commission. We intend the forward-looking statements
to speak only as of the time made and do not undertake to update or revise
them as more information becomes available.

About Sears Holdings Corporation

Sears Holdings Corporation is a leading integrated retailer with over 2,600
full-line and specialty retail stores in the United States and Canada and the
home of SHOP YOUR WAY, a social shopping experience where members have the
ability to earn points and receive benefits across a wide variety of physical
and digital formats through ShopYourWay.com.  Sears Holdings is the leading
home appliance retailer as well as a leader in tools, lawn and garden, fitness
equipment and automotive repair and maintenance.  Key proprietary brands
include Kenmore, Craftsman and DieHard, with a broad apparel offering,
including such well-known labels as Lands' End, the Kardashian Kollection,
Jaclyn Smith and Joe Boxer, as well as Sofia by Sofia Vergara and The Country
Living Home Collection.   We are the nation's largest provider of home
services, with more than 15 million service and installation calls made
annually and have a long-established commitment to those who serve in the
military through initiatives like the Heroes at Home program. We have been
named the 2011 Mobile Retailer of the Year, Recipient of the 2012 ENERGY STAR®
"Corporate Commitment Award" for Product Retailing and Energy Management and
one of the Top 20 Best Places to Work for Recent Grads.  Sears Holdings
Corporation operates through its subsidiaries, including Sears, Roebuck and
Co. and Kmart Corporation.  For more information, visit Sears Holdings'
website at www.searsholdings.com. Twitter: @searsholdings | |Facebook:
http://www.facebook.com/SHCCareers

NEWS MEDIA CONTACT:
Sears Holdings Public Relations
(847) 286-8371

 

Sears Holdings Corporation
Consolidated Statements of Operations
(Unaudited)
 Amounts are Preliminary
 and Subject to Change
                            13 Weeks Ended            39 Weeks Ended
 millions, except per       October 27,  October 29,  October 27,  October 29,
 share data
                            2012         2011         2012         2011
REVENUES
 Merchandise sales and      $   8,857    $   9,405    $   27,594   $   29,083
 services
COSTS AND EXPENSES
 Cost of sales, buying and  6,604        7,011        20,243       21,544
 occupancy
 Gross margin dollars       2,253        2,394        7,351        7,539
 Gross margin rate          25.4%        25.5%        26.6%        25.9%
 Selling and                2,496        2,635        7,378        7,743
 administrative
 Selling and
 administrative expense as  28.2%        28.0%        26.7%        26.6%
 a percentage of total
 revenues
 Depreciation and           211          210          625          641
 amortization
 Gain on sales of assets    (26)         (4)          (436)        (35)
 Total costs and expenses   9,285        9,852        27,810       29,893
Operating loss              (428)        (447)        (216)        (810)
Interest expense            (68)         (70)         (199)        (216)
Interest and investment     7            6            28           31
income
Other income (loss)         2            6            3            (2)
Loss from continuing
operations before income    (487)        (505)        (384)        (997)
taxes
Income tax (expense)        (11)         91           (53)         264
benefit
Loss from continuing        (498)        (414)        (437)        (733)
operations
Loss from discontinued      —            (11)         —            (10)
operations, net of tax
Net loss                    (498)        (425)        (437)        (743)
(Income) loss attributable  —            4            (4)          6
to noncontrolling interest
NET LOSS ATTRIBUTABLE TO    (498)        $   (421)    (441)        $   (737)
HOLDINGS' SHAREHOLDERS
Amounts attributable to
Holdings' shareholders:
Loss from continuing        (498)        $   (410)    (441)        $   (727)
operations, net of tax
Loss from discontinued      —            (11)         —            (10)
operations, net of tax
Net loss                    (498)        $   (421)    (441)        $   (737)
NET LOSS PER COMMON SHARE:
 Diluted:
 Continuing operations      $   (4.70)   $   (3.85)   $   (4.16)   $   (6.80)
 Discontinued operations    —            (0.10)       —            (0.09)
                            $   (4.70)   $   (3.95)   $   (4.16)   $   (6.89)
 Diluted weighted average   105.9        106.5        105.9        107.0
 common shares outstanding


Sears Holdings Corporation
Condensed Consolidated Balance Sheets
Amounts are Preliminary and Subject
to Change
                                      (Unaudited)
                                      October 27,  October 29,  January 28,
millions
                                      2012         2011         2012
ASSETS
Current assets
Cash and cash equivalents             $   622      $   591      $   747
Restricted cash                       11           8            7
Accounts receivable                   665          653          695
Merchandise inventories               9,567        10,941       8,407
Prepaid expenses and other current    413          617          388
assets
Current assets of discontinued        —            226          —
operations
Total current assets                  11,278       13,036       10,244
Property and equipment, net           6,174        6,796        6,577
Goodwill                              674          1,392        841
Trade names and other intangible      2,894        2,950        2,937
assets
Other assets                          782          1,056        782
Non-current assets of discontinued    —            376          —
operations
TOTAL ASSETS                          $   21,802   $   25,606   $   21,381
LIABILITIES
Current liabilities
Short-term borrowings                 $   1,890    $   2,002    $   1,175
Current portion of long-term debt     154          157          230
and capitalized lease obligations
Merchandise payables                  3,851        4,471        2,912
Other current liabilities             2,818        2,927        2,892
Unearned revenues                     940          948          964
Other taxes                           516          502          523
Short-term deferred tax liabilities   506          214          516
Current liabilities of discontinued   —            148          —
operations
Total current liabilities             10,675       11,369       9,212
Long-term debt and capitalized lease  1,960        2,073        2,088
obligations
Pension and post-retirement benefits  2,260        1,859        2,738
Other long-term liabilities           2,137        2,227        2,186
Long-term deferred tax liabilities    869          —            816
Non-current liabilities of            —            362          —
discontinued operations
Total Liabilities                     17,901       17,890       17,040
Total Equity                          3,901        7,716        4,341
TOTAL LIABILITIES AND EQUITY          $   21,802   $   25,606   $   21,381
Total common shares outstanding       106.4        106.9        106.3


Sears Holdings Corporation
Segment Results
(Unaudited)
Amounts are Preliminary
and Subject to Change
                           13 Weeks Ended October 27, 2012
millions, except store     Kmart    Sears Domestic  Sears Canada  Sears
data                                                              Holdings
Merchandise sales and      $ 3,081  $     4,724     $    1,052    $  8,857
services
Cost of sales, buying and  2,409    3,448           747           6,604
occupancy
Gross margin dollars       672      1,276           305           2,253
Gross margin rate          21.8%    27.0%           29.0%         25.4%
Selling and                800      1,393           303           2,496
administrative
Selling and
administrative expense as  26.0%    29.5%           28.8%         28.2%
a percentage of total
revenues
Depreciation and           39       145             27            211
amortization
Gain on sales of assets    (3)      (17)            (6)           (26)
Total costs and expenses   3,245    4,969           1,071         9,285
Operating loss             $ (164)  $     (245)     $    (19)     $  (428)
Number of:
Kmart Stores               1,252    —               —             1,252
Full-Line Stores           —        814             118           932
Specialty Stores           —        52              365           417
Total Stores               1,252    866             483           2,601
                           13 Weeks Ended October 29, 2011
millions, except store     Kmart    Sears Domestic  Sears Canada  Sears
data                                                              Holdings
Merchandise sales and      $ 3,343  $     4,954     $    1,108    $  9,405
services
Cost of sales, buying and  2,578    3,622           811           7,011
occupancy
Gross margin dollars       765      1,332           297           2,394
Gross margin rate          22.9%    26.9%           26.8%         25.5%
Selling and                838      1,487           310           2,635
administrative
Selling and
administrative expense as  25.1%    30.0%           28.0%         28.0%
a percentage of total
revenues
Depreciation and           37       146             27            210
amortization
Gain on sales of assets    (2)      (2)             —             (4)
Total costs and expenses   3,451    5,253           1,148         9,852
Operating loss             $ (108)  $     (299)     $    (40)     $  (447)
Number of:
Kmart Stores               1,309    —               —             1,309
Full-Line Stores           —        868             122           990
Specialty Stores           —        1,295           378           1,673
Total Stores               1,309    2,163           500           3,972

Sears Holdings Corporation
Segment Results
(Unaudited)
Amounts are Preliminary and Subject
to Change
                                      39 Weeks Ended October 27, 2012
millions, except store data           Kmart     Sears     Sears    Sears
                                                Domestic  Canada   Holdings
Merchandise sales and services        $ 9,870   $ 14,724  $ 3,000  $ 27,594
Cost of sales, buying and occupancy   7,560     10,546    2,137    20,243
Gross margin dollars                  2,310     4,178     863      7,351
Gross margin rate                     23.4%     28.4%     28.8%    26.6%
Selling and administrative            2,315     4,197     866      7,378
Selling and administrative expense    23.5%     28.5%     28.9%    26.7%
as a percentage of total revenues
Depreciation and amortization         110       437       78       625
Gain on sales of assets               (17)      (250)     (169)    (436)
Total costs and expenses              9,968     14,930    2,912    27,810
Operating income (loss)               $ (98)    $ (206)   $ 88     $ (216)
Number of:
Kmart Stores                          1,252     —         —        1,252
Full-Line Stores                      —         814       118      932
Specialty Stores                      —         52        365      417
Total Stores                          1,252     866       483      2,601
                                      39 Weeks Ended October 29, 2011
millions, except store data           Kmart     Sears     Sears    Sears
                                                Domestic  Canada   Holdings
Merchandise sales and services        $ 10,446  $ 15,340  $ 3,297  $ 29,083
Cost of sales, buying and occupancy   8,011     11,175    2,358    21,544
Gross margin dollars                  2,435     4,165     939      7,539
Gross margin rate                     23.3%     27.2%     28.5%    25.9%
Selling and administrative            2,436     4,368     939      7,743
Selling and administrative expense    23.3%     28.5%     28.5%    26.6%
as a percentage of total revenues
Depreciation and amortization         111       452       78       641
Gain on sales of assets               (9)       (26)      —        (35)
Total costs and expenses              10,549    15,969    3,375    29,893
Operating loss                        $ (103)   $ (629)   $ (78)   $ (810)
Number of:
Kmart Stores                          1,309     —         —        1,309
Full-Line Stores                      —         868       122      990
Specialty Stores                      —         1,295     378      1,673
Total Stores                          1,309     2,163     500      3,972


Sears Holdings Corporation
Adjusted EBITDA
Amounts are
Preliminary and
Subject to
Change
              13 Weeks Ended
millions      October 27, 2012                  October 29, 2011
              Kmart   Sears    Sears  Sears     Kmart   Sears    Sears  Sears
                      Domestic Canada Holdings          Domestic Canada Holdings
Operating
loss per      $ (164) $  (245) $ (19) $  (428)  $ (108) $  (299) $ (40) $  (447)
statement of
operations
Depreciation
and           39      145      27     211       37      146      27     210
amortization
Gain on
sales of      (3)     (17)     (6)    (26)      (2)     (2)      —      (4)
assets
Before
excluded      (128)   (117)    2      (243)     (73)    (155)    (13)   (241)
items
Closed store
reserve and   27      8        3      38        5       13       5      23
severance
Domestic
pension       —       42       —      42        —       19       —      19
expense
Transaction   —       4        3      7         —       —        —      —
costs
Hurricane     —       —        —      —         —       9        —      9
losses
Adjusted
EBITDA as     $ (101) $  (63)  $ 8    $  (156)  $ (68)  $  (114) $ (8)  $  (190)
defined
% to          (3.3)%  (1.3)%   0.8%   (1.8)%    (2.0)%  (2.3)%   (0.7)% (2.0)%
revenues
              39 Weeks Ended
millions      October 27, 2012                  October 29, 2011
              Kmart   Sears    Sears  Sears     Kmart   Sears    Sears  Sears
                      Domestic Canada Holdings          Domestic Canada Holdings
Operating
income
(loss) per    $ (98)  $  (206) $ 88   $  (216)  $ (103) $  (629) $ (78) $  (810)
statement of
operations
Depreciation
and           110     437      78     625       111     452      78     641
amortization
Gain on
sales of      (17)    (250)    (169)  (436)     (9)     (26)     —      (35)
assets
Before
excluded      (5)     (19)     (3)    (27)      (1)     (203)    —      (204)
items
Closed store
reserve and   38      47       5      90        15      45       5      65
severance
Domestic
pension       —       124      —      124       —       56       —      56
expense
Transaction   —       7        3      10        —       —        —      —
costs
Hurricane     —       —        —      —         —       9        —      9
losses
Adjusted
EBITDA as     $ 33    $  159   $ 5    $  197    $ 14    $  (93)  $ 5    $  (74)
defined
% to          0.3%    1.1%     0.2%   0.7%      0.1%    (0.6)%   0.2%   (0.3)%
revenues

Sears Holdings Corporation
Adjusted Earnings per Share
Amounts are Preliminary
and Subject to Change
               13 Weeks Ended October 27, 2012
                        Domestic Closed Store
millions,                                     Gain on Sales  Transaction Tax     As
except per     GAAP     Pension  Reserve  and of Assets      Costs       Matters
share data                                                                       Adjusted
                        Expense  Severance
Cost of sales,
buying and     $ 6,604  $  —     $    (32)    $     —        $    —      $  —    $   6,572
occupancy
impact
Selling and
administrative 2,496    (42)     (6)          —              (7)         —       2,441
impact
Depreciation
and            211      —        (9)          —              —           —       202
amortization
impact
Gain on sales
of assets      (26)     —        —            12             —           —       (14)
impact
Operating loss (428)    42       47           (12)           7           —       (344)
impact
Income tax     (11)     (16)     (18)         5              (3)         235     192
expense impact
After tax and
noncontrolling (498)    26       29           (7)            4           235     (211)
interest
impact
Diluted loss
per share      $ (4.70) $  0.25  $    0.27    $     (0.07)   $    0.04   $  2.22 $   (1.99)
impact
               13 Weeks Ended October 29, 2011
                        Domestic Closed Store
millions,                                     Mark-to-Market Hurricane   Tax     Discontinued As
except per     GAAP     Pension  Reserve and                 Losses      Matters
share data                                    Gains                              Operations   Adjusted
                        Expense  Severance
Cost of sales,
buying and     $ 7,011  $  —     $    (14)    $     —        $    —      $  —    $   —        $ 6,997
occupancy
impact
Selling and
administrative 2,635    (19)     (9)          —              (9)         —       —            2,598
impact
Operating loss (447)    19       23           —              9           —       —            (396)
impact
Other income   6        —        —            (4)            —           —       —            2
impact
Income tax     91       (4)      (4)          1              (2)         100     —            182
benefit impact
Loss from
discontinued
operations,    (11)     —        —            —              —           —       11           —
net of tax
impact
After tax and
noncontrolling (421)    15       19           (3)            7           100     11           (272)
interest
impact
Diluted loss
per share      $ (3.95) $  0.14  $    0.18    $     (0.03)   $    0.07   $  0.94 $   0.10     $ (2.55)
impact

 

 

 

Sears Holdings Corporation
Adjusted Earnings per Share
Amounts are Preliminary
and Subject to Change
               39 Weeks Ended October 27, 2012
millions,               Domestic Closed Store Gain on
except per     GAAP     Pension  Reserve and  Sales    Transaction    Tax       As
share data              Expense  Severance    of       Costs          Matters   Adjusted
                                              Assets
Cost of sales,
buying and     $ 20,243 $  —     $    (32)    $ —      $      —       $   —     $ 20,211
occupancy
impact
Selling and
administrative 7,378    (124)    (58)         —        (10)           —         7,186
impact
Depreciation
and            625      —        (16)         —        —              —         609
amortization
impact
Gain on sales
of assets      (436)    —        —            398      —              —         (38)
impact
Operating loss (216)    124      106          (398)    10             —         (374)
impact
Income tax     (53)     (47)     (40)         149      (4)            198       203
expense impact
Income
attributable
to             (4)      —        —            8        —              —         4
noncontrolling
interest
impact
After tax and
noncontrolling (441)    77       66           (241)    6              198       (335)
interest
impact
Diluted loss
per share      $ (4.16) $  0.73  $    0.62    $ (2.28) $      0.06    $   1.87  $ (3.16)
impact
               39 Weeks Ended October 29, 2011
millions,               Domestic Closed Store Gain on
except per     GAAP     Pension  Reserve and  Sales    Mark-to-Market Hurricane Tax      Discontinued As
share data              Expense  Severance    of       Losses         Losses    Matters  Operations   Adjusted
                                              Assets
Cost of sales,
buying and     $ 21,544 $  —     $    (37)    $ —      $      —       $   —     $ —      —            $ 21,507
occupancy
impact
Selling and
administrative 7,743    (56)     (28)         —        —              (9)       —        —            7,650
impact
Depreciation
and            641      —        (8)          —        —              —         —        —            633
amortization
impact
Gain on sales
of assets      (35)     —        —            21       —              —         —        —            (14)
impact
Operating loss (810)    56       73           (21)     —              9         —        —            (693)
impact
Other loss     (2)      —        —            —        6              —         —        —            4
impact
Income tax     264      (15)     (19)         7        (2)            (2)       100      —            333
benefit impact
Loss from
discontinued
operations,    (10)     —        —            —        —              —         —        10           —
net of tax
impact
After tax and
noncontrolling (737)    41       54           (14)     4              7         100      10           (535)
interest
impact
Diluted loss
per share      $ (6.89) $  0.38  $    0.51    $ (0.13) $      0.04    $   0.07  $ 0.93   0.09         $ (5.00)
impact

 

 

 

 

SOURCE Sears Holdings Corporation

Website: http://www.searsholdings.com
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