Sears Holdings Reports Second Quarter 2013 Results

              Sears Holdings Reports Second Quarter 2013 Results

PR Newswire

HOFFMAN ESTATES, Ill., Aug. 22, 2013

HOFFMAN ESTATES, Ill., Aug. 22, 2013 /PRNewswire/ -- Sears Holdings
Corporation ("Holdings," "we," "us," "our" or the "Company") (NASDAQ: SHLD)
today reported its second quarter 2013 results. As a supplement to this
earnings release, please see our presentation at our website
http://searsholdings.com/invest.

In summary, we reported:

  oNet loss attributable to Holdings' shareholders of $194 million, or $1.83
    loss per diluted share, compared to $132 million, or $1.25 loss per
    diluted share, in the prior year quarter;
  oAdjusted EBITDA of $(55) million for the second quarter of 2013 compared
    to $116 million in the prior year quarter;
  oAdjusted loss per diluted share for the quarter of $1.46 and $1.06 in 2013
    and 2012, respectively;
  oSecond quarter 2013 included gains on the sale of assets of $58 million,
    after tax and noncontrolling interest, from the sale of certain U.S. and
    Canadian stores and leasehold interests. These transactions generated
    approximately $277 million of cash proceeds;
  oIn the second quarter of 2013, Kmart comparable store sales declined 2.1%,
    Sears Domestic declined 0.8% and Sears Canada declined 2.5%;
  oOur online business on sears.com and kmart.com grew 20% over the prior
    year second quarter;
  oOur Shop Your Way^™ membership program is continuing to gain traction with
    our members as members continue to engage in all aspects of our program,
    including points and other program benefits. Shop Your Way members
    generated over 65% of our revenues at Sears Domestic and Kmart during the
    quarter, as compared to over 55% in the prior year quarter;
  oGross margin rate decreased 210 basis points for the second quarter of
    2013 compared to the prior year second quarter; and
  oDomestic inventory declined $968 million from the prior year second
    quarter. Excluding the inventory related to Sears Hometown and Outlet
    Stores, Inc. ("SHO"), Domestic inventory declined approximately $564
    million.

"We made meaningful progress this quarter in our transformation to a
member-centric company. Shop Your Way members represented over 65% of our
sales and they redeemed rewards points at a significantly higher rate than
last year. While the increase in Shop Your Way promotional activity and member
redemptions resulted in a meaningful increase in our costs, it demonstrates
that our members are deepening their engagement with our program which will
allow us to further accelerate our transformation," commented Eddie Lampert,
Sears Holdings' Chairman and Chief Executive Officer. "At the same time, we
recognize how important it is to improve the profitability of our company and
I am disappointed that we did not deliver a better result."

Second Quarter Revenues and Comparable Store Sales
Revenues decreased $596 million to $8.9 billion for the quarter ended August
3, 2013, as compared to revenues of $9.5 billion for the quarter ended July
28, 2012. The decrease in revenue was primarily due to the effect of having
fewer Kmart and Sears Full-line stores in operation, which accounted for
approximately $210 million of the decline. Revenues were also impacted by
approximately $195 million attributable to the separation of SHO, which
occurred in the third quarter of 2012. We recorded revenues from SHO of
approximately $450 million, primarily related to merchandise sold to SHO for
resale, in the second quarter of 2013. The prior year quarter included
revenues of approximately $645 million related to SHO merchandise sales to its
customers. In addition, our revenues were impacted by lower domestic
comparable store sales, which accounted for approximately $100 million of the
decline. Second quarter revenues also included a decrease of $13 million due
to foreign currency exchange rates.

For the quarter, domestic comparable store sales declined 1.5%, comprised of
decreases of 2.1% at Kmart and 0.8% at Sears Domestic. The decline at Kmart
reflects decreases in our transactional categories, such as grocery &
household, pharmacy and drugstore. It also includes declines in consumer
electronics and toys. These decreases were partially offset by increases in
the footwear and lawn & garden categories.

Sears Domestic comparable store sales declined 0.8% due to a decrease in the
home appliance category, which was partially offset by increases in the lawn &
garden, apparel and home categories. The Sears Domestic apparel category has
now achieved comparable store sales increases for eight consecutive quarters.

Operating Performance
For the quarter, our gross margin decreased $345 million to $2.2 billion in
2013 due to the above noted decline in sales as well as a decline in gross
margin rate. Gross margin included expenses of $7 million in the second
quarter of 2013 related to store closings while the second quarter of 2012
included gross margin of $160 million from SHO. Excluding these items, gross
margin decreased $178 million.

The gross margin rate for both Kmart and Sears Domestic was impacted by
transactions that offer both traditional promotional marketing discounts and
Shop Your Way points. As compared to the prior year, Kmart's gross margin rate
for the second quarter declined 100 basis points, as decreases in the
footwear, seasonal and toys categories were only partially offset by an
improvement in the apparel category. Sears Domestic's gross margin rate
declined 280 basis points for the quarter primarily due to selling merchandise
to SHO at cost pursuant to the terms of the separation, which accounted for
approximately 170 basis points of the decline. Sears Domestic also experienced
decreases in the home appliances and automotive categories, which were only
partially offset by an improvement in the apparel category. Sears Canada's
gross margin rate declined 240 basis points for the second quarter due to an
increase in inventory reserve requirements.

Selling and administrative expenses decreased $146 million in the second
quarter of 2013 compared to the prior year quarter and included expenses
related to domestic pension plans, store closings and severance of $43 million
and $59 million for 2013 and 2012, respectively. The second quarter of 2012
also included selling and administrative expenses of $124 million related to
SHO. Excluding these items, selling and administrative expenses declined $6
million due to favorable legal settlements during the second quarter of 2013,
which were partially offset by increases in a number of other expense
categories.

We reported an operating loss of $51 million and $103 million for the second
quarter of 2013 and 2012, respectively. Operating loss for the second quarter
of 2013 included expenses related to domestic pension plans, store closings,
and severance, as well as gains on the sales of assets which aggregated to
operating income of $184 million. Operating loss for the second quarter of
2012 included expenses related to domestic pension plans, store closings and
severance, as well as operating income from SHO, which aggregated to operating
income of $32 million. Excluding these items, we would have reported an
operating loss of $235 million and $71 million in the second quarter of 2013
and 2012, respectively. See the attached schedule, "Adjusted Earnings per
Share," for a reconciliation from GAAP to as adjusted amounts, including
adjusted earnings per diluted share.

Our effective tax rate for the second quarter of 2013 was an expense of 30.9%
compared with a benefit of 15.8% in 2012. Our tax rate in 2013 continues to
reflect 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 would be realized. In addition, the second quarter of 2013 benefited
from favorable audit settlements and the lower tax on the Sears Canada gain on
sales of assets.

Our fiscal 2013 second quarter was comprised of the 13-week period ended
August 3, 2013, while our fiscal 2012 second quarter was comprised of the
13-week period ended July 28, 2012. This one week shift in sales had no impact
on the domestic comparable store sales results reported herein due to the fact
that for purposes of reporting domestic comparable store sales for the second
quarter, weeks 14 through 26 for fiscal 2013 have been compared to weeks 15
through 27 of fiscal year 2012, thereby eliminating the impact of the one week
shift. In addition, domestic comparable store sales amounts for the second
quarter include online sales from sears.com and kmart.com shipped directly to
customers, which resulted in a benefit of approximately 75 basis points,and
have been adjusted for the change in the unshipped sales reserves recorded at
the end of each reporting period, which resulted in a negativeimpact of
approximately 60 basis points.

Financial Position
"At the end of the second quarter, our financial flexibility remains strong
with cash of approximately $700 million, availability under our credit
facilities of approximately $1.6 billion and inventory, net of payables, of
approximately $4.8 billion. During the first half, we generated approximately
$290 million of proceeds from real estate transactions," said Rob Schriesheim,
Holdings' Chief Financial Officer. "While we believe that we continue to have
potential options relating to our protection agreement business, we have not
decided what actions, if any, to take with regard to this business. Regardless
of the outcome of this process, we have made significant progress toward our
goal to raise at least $500 million of additional liquidity in 2013. With
regard to the objectives we outlined in our February earnings release,
weremain on track to reduce 2013 peak domestic inventory by $500 million from
the 2012 level of $8.6 billion at the end of the third quarter as a result of
stores already or expectedto be closed, initiatives underway to reduce
slow-moving inventory and modest productivity improvement. This action is
expected to generate $300 million of cash after consideration of related
payables. We also expect to further reduce our fixed cost base by another $200
million, much of which will occur in the second half."

We had cash balances of $681 million at August 3, 2013 ($383 million domestic
and $298 million at Sears Canada) as compared to $618 million ($380 million
domestic and $238 million at Sears Canada) at February 2, 2013. The increase
in cash during the first half of 2013 was primarily due to proceeds received
from the sales of properties which were partially offset by higher working
capital needs.

Merchandise inventories at August 3, 2013 were $7.7 billion, as compared to
$8.7 billion at July 28, 2012. Domestic inventory decreased $968 million to
$6.9 billion at August 3, 2013. Excluding the inventory related to SHO,
domestic inventory decreased approximately $564 million from the prior year's
second quarter driven by both improved productivity and store closures. Sears
Domestic inventory decreased in virtually all categories, with the most
notable decreases in the consumer electronics and tools categories, as well as
in apparel, sporting goods and jewelry. Kmart inventory also decreased in
virtually all categories with the most notable decreases in the consumer
electronics, grocery & household and drugstore categories.

Total debt (consisting of short-term borrowings, long-term debt and capital
lease obligations) was $3.7 billion at August 3, 2013, compared to $3.1
billion at February 2, 2013. The increase in borrowings funded our quarterly
operations, including the loss for the period, seasonal inventory build,
pension contributions and capital expenditures. Availability under our credit
facilities was $1.6 billion ($1.1 billion domestic and $0.5 billion at Sears
Canada, prior to taking into consideration possible reserves) at August 3,
2013.

Adjusted EBITDA
In addition to our net income (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 income (loss) attributable to
Sears Holdings Corporation appearing on the statements of operations excluding
income (loss) attributable to noncontrolling interests, 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 ongoing operating performance and useful to the
investors because:

  oEBITDA excludes the effects of financing and investing activities by
    eliminating the effects of interest and depreciation costs;
  oManagement considers gains/(losses) on the sale of assets to result from
    investing decisions rather than ongoing operations; and
  oOther 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,
    including the results of SHO that were included in our results of
    operations prior to the separation. Adjustments to EBITDA include
    impairment charges related to fixed assets and intangible assets, closed
    store and severance charges, domestic pension expense and the SHO
    separation. We have adjusted our results for these items to make our
    statements more comparable and therefore more useful to investors as the
    items are not representative of our ongoing operations and reflect past
    investment decisions.

Adjusted EBITDA was determined as follows:

                                      13 Weeks Ended       26 Weeks Ended
millions                              August3,  July28,  August3,  July28,
                                      2013       2012      2013       2012
Net income (loss) attributable to     $  (194)   $  (132)  $  (473)   $   57
SHC per statement of operations
Income (loss) attributable to         67         (1)       54         4
noncontrolling interests
Income tax expense (benefit)          30         (25)      21         42
Interest expense                      59         65        120        131
Interest and investment income        (14)       (9)       (21)       (21)
Other (income) loss                   1          (1)       1          (1)
Operating income (loss)               (51)       (103)     (298)      212
Depreciation and amortization         187        212       378        414
Gain on sales of assets               (241)      (15)      (255)      (410)
Before excluded items                 (105)      94        (175)      216
Closed store reserve and severance    10         18        23         52
Domestic pension expense              40         41        81         82
Impairment charges                    —          —         8          —
Adjusted EBITDA                       $  (55)    $  153    $  (63)    $   350
SHO separation                        —          (37)      —          (74)
Adjusted EBITDA as defined            $  (55)    $  116    $  (63)    $   276
% to revenues                         (0.6)%     1.3%      (0.4)%     1.6%



Adjusted EBITDA for our segments was as follows:

                      13 Weeks Ended
                      Adjusted EBITDA      % To Revenues
millions              August 3,  July28,  August3,  July28,
                      2013       2012      2013       2012
Kmart                 $   (30)   $   33    (0.9)%     1.0%
Sears Domestic            (20)       74    (0.4)%     1.7%
Sears Canada              (5)        9     (0.5)%     0.9%
Total Adjusted EBITDA $   (55)   $   116   (0.6)%     1.3%
                      26 Weeks Ended
                      Adjusted EBITDA      % To Revenues
millions              August3,  July28,  August3,  July28,
                      2013       2012      2013       2012
Kmart                 $   (30)   $   134   (0.5)%     2.0%
Sears Domestic            (17)       145   (0.2)%     1.7%
Sears Canada              (16)       (3)   (0.9)%     (0.2)%
Total Adjusted EBITDA $   (63)   $   276   (0.4)%     1.6%

We also believe that our use of Adjusted EPS provides an appropriate measure
for investors to use in assessing our performance across periods, given that
this measure provides an adjustment for certain significant items which may
vary significantly from period to period, improving the comparability of
year-to-year results and is therefore representative of our ongoing
performance. Therefore, we have adjusted our results for them to make our
statements more useful and comparable. However, we do not, and do not
recommend that you, solely use Adjusted EPS to assess our financial and
earnings performance. We also use, and recommend that you use, diluted
earnings per share in addition to Adjusted EPS in assessing our earnings
performance.

In addition to the significant items included in the Adjusted EBITDA
calculation, Adjusted EPS includes the following 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
comparability of results.

Forward-Looking Statements
Results are preliminary and unaudited. This press release contains
forward-looking statements about our expectations for the second quarter of
fiscal 2013, our transformation to a member centric company, and our
objectives with respect to generation of additional liquidity. 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 our
Integrated Retail strategy; 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; conditions and possible limits on our access to capital markets
and other financing sources, including incremental financings under the
accordion feature of our domestic credit agreement and additional second lien
financings, with respect to which we do not have commitments from our lenders;
our ability to successfully achieve our plans to generate liquidity, reduce
inventory and reduce fixed costs; whether we have possible strategic
alternatives with respect to our businesses and assets that we could choose to
pursue, whether we explore or pursue such alternatives, and, if so, our
ability to complete any such possible strategic alternatives we are exploring,
including with respect to our protection agreement business, on terms that are
favorable to us, on intended timetables or at all; 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, including legacy systems, to implement our
integrated retail strategy, 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 and the transfer of
significant internal historical knowledge of such parties; 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 (NASDAQ: SHLD) is a leading integrated retailer
with almost 2,500 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 14 million service and installation
calls made annually, and have a long-established commitment to those who serve
in the military through initiatives like theHeroes at Homeprogram. We have
been named the 2011 Mobile Retailer of the Year, Recipient of the 2013 ENERGY
STAR® " Partner of the Year - Sustained Excellence Award" for Product
Retailing and Energy Management and was named one of the Top 20 Best Places to
Work for Recent Grads. Sears Holdings Corporation operates through its
subsidiaries, includingSears, Roebuck and Co. andKmartCorporation.For more
information, visit Sears Holdings' website
atwww.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       13 Weeks Ended       26 Weeks Ended
Subject to Change
millions, except per share data   August3,  July28,  August3,  July28,
                                  2013       2012      2013       2012
REVENUES
Merchandise sales and services    $  8,871   $ 9,467   $  17,323  $ 18,737
COSTS AND EXPENSES
Cost of sales, buying and         6,685      6,936     12,981     13,639
occupancy
Gross margin dollars              2,186      2,531     4,342      5,098
Gross margin rate                 24.6%      26.7%     25.1%      27.2%
Selling and administrative        2,291      2,437     4,509      4,882
Selling and administrative
expense as a percentage of total  25.8%      25.7%     26.0%      26.1%
revenues
Depreciation and amortization     187        212       378        414
Impairment charges                —          —         8          —
Gain on sales of assets           (241)      (15)      (255)      (410)
Total costs and expenses          8,922      9,570     17,621     18,525
Operating income (loss)           (51)       (103)     (298)      212
Interest expense                  (59)       (65)      (120)      (131)
Interest and investment income    14         9         21         21
Other income (loss)               (1)        1         (1)        1
Income (loss) before income       (97)       (158)     (398)      103
taxes
Income tax (expense) benefit      (30)       25        (21)       (42)
Net income (loss)                 (127)      (133)     (419)      61
(Income) loss attributable to     (67)       1         (54)       (4)
noncontrolling interests
NET INCOME (LOSS) ATTRIBUTABLE    $  (194)   $ (132)   $  (473)   $ 57
TO HOLDINGS' SHAREHOLDERS
NET INCOME (LOSS) PER COMMON
SHARE ATTRIBUTABLE TO HOLDINGS'
SHAREHOLDERS
Diluted earnings (loss) per       $  (1.83)  $ (1.25)  $  (4.46)  $ 0.54
share
Diluted weighted average common   106.1      105.9     106.1      106.1
shares outstanding





Sears Holdings Corporation
Condensed Consolidated Balance Sheets
Amounts are Preliminary and Subject to
Change
                                           (Unaudited)
millions                                   August3,  July28,  February2,
                                           2013       2012      2013
ASSETS
Current assets
Cash and cash equivalents                  $  671     $ 730     $   609
Restricted cash                            10         8         9
Accounts receivable                        641        569       635
Merchandise inventories                    7,708      8,653     7,558
Prepaid expenses and other current assets  470        385       454
Total current assets                       9,500      10,345    9,265
Property and equipment, net                5,786      6,341     6,053
Goodwill                                   379        841       379
Trade names and other intangible assets    2,864      2,907     2,881
Other assets                               749        749       762
TOTAL ASSETS                               $  19,278  $ 21,183  $   19,340
LIABILITIES
Current liabilities
Short-term borrowings                      $  1,756   $ 1,176   $   1,094
Current portion of long-term debt and      75         154       83
capitalized lease obligations
Merchandise payables                       2,903      3,088     2,761
Other current liabilities                  2,435      2,742     2,683
Unearned revenues                          925        962       931
Other taxes                                484        535       480
Short-term deferred tax liabilities        382        515       382
Total current liabilities                  8,960      9,172     8,414
Long-term debt and capitalized lease       1,911      1,970     1,943
obligations
Pension and postretirement benefits        2,539      2,582     2,730
Other long-term liabilities                2,081      2,124     2,126
Long-term deferred tax liabilities         963        839       955
Total Liabilities                          16,454     16,687    16,168
EQUITY
Total Equity                               2,824      4,496     3,172
TOTAL LIABILITIES AND EQUITY               $  19,278  $ 21,183  $   19,340
Total common shares outstanding            106.5      106.5     106.4





Sears Holdings Corporation
Segment Results
(Unaudited)
Amounts are Preliminary and Subject to Change
                                      13 Weeks Ended August 3, 2013
millions, except store data           Kmart    Sears     Sears    Sears
                                               Domestic  Canada   Holdings
Merchandise sales and services        $ 3,168  $  4,783  $ 920    $  8,871
Cost of sales, buying and occupancy   2,459    3,544     682      6,685
Gross margin dollars                  709      1,239     238      2,186
Gross margin rate                     22.4%    25.9%     25.9%    24.6%
Selling and administrative            747      1,301     243      2,291
Selling and administrative expense as 23.6%    27.2%     26.4%    25.8%
a percentage of total revenues
Depreciation and amortization         33       129       25       187
Gain on sales of assets               (15)     (45)      (181)    (241)
Total costs and expenses              3,224    4,929     769      8,922
Operating income (loss)               $ (56)   $  (146)  $ 151    $  (51)
Number of:
Kmart Stores                          1,195    —         —        1,195
Full-Line Stores                      —        791       118      909
Specialty Stores                      —        50        343      393
Total Stores                          1,195    841       461      2,497
                                      13 Weeks Ended July 28, 2012
millions, except store data           Kmart    Sears     Sears    Sears
                                               Domestic  Canada   Holdings
Merchandise sales and services        $ 3,374  $  5,062  $ 1,031  $  9,467
Cost of sales, buying and occupancy   2,586    3,611     739      6,936
Gross margin dollars                  788      1,451     292      2,531
Gross margin rate                     23.4%    28.7%     28.3%    26.7%
Selling and administrative            763      1,389     285      2,437
Selling and administrative expense as 22.6%    27.4%     27.6%    25.7%
a percentage of total revenues
Depreciation and amortization         38       149       25       212
Gain on sales of assets               (9)      (5)       (1)      (15)
Total costs and expenses              3,378    5,144     1,048    9,570
Operating loss                        $ (4)    $  (82)   $ (17)   $  (103)
Number of:
Kmart Stores                          1,261    —         —        1,261
Full-Line Stores                      —        814       122      936
Specialty Stores                      —        1,282     369      1,651
Total Stores                          1,261    2,096     491      3,848







Sears Holdings Corporation
Segment Results
(Unaudited)
Amounts are Preliminary and Subject
to Change
                                      26 Weeks Ended August 3, 2013
millions, except store data           Kmart    Sears     Sears    Sears
                                               Domestic  Canada   Holdings
Merchandise sales and services        $ 6,271  $ 9,290   $ 1,762  $ 17,323
Cost of sales, buying and occupancy   4,857    6,837     1,287    12,981
Gross margin dollars                  1,414    2,453     475      4,342
Gross margin rate                     22.5%    26.4%     27.0%    25.1%
Selling and administrative            1,460    2,556     493      4,509
Selling and administrative expense as 23.3%    27.5%     28.0%    26.0%
a percentage of total revenues
Depreciation and amortization         66       262       50       378
Impairment charges                    —        8         —        8
Gain on sales of assets               (28)     (46)      (181)    (255)
Total costs and expenses              6,355    9,617     1,649    17,621
Operating income (loss)               $ (84)   $ (327)   $ 113    $ (298)
Number of:
Kmart Stores                          1,195    —         —        1,195
Full-Line Stores                      —        791       118      909
Specialty Stores                      —        50        343      393
Total Stores                          1,195    841       461      2,497
                                      26 Weeks Ended July 28, 2012
millions, except store data           Kmart    Sears     Sears    Sears
                                               Domestic  Canada   Holdings
Merchandise sales and services        $ 6,789  $ 10,000  $ 1,948  $ 18,737
Cost of sales, buying and occupancy   5,151    7,098     1,390    13,639
Gross margin dollars                  1,638    2,902     558      5,098
Gross margin rate                     24.1%    29.0%     28.6%    27.2%
Selling and administrative            1,515    2,804     563      4,882
Selling and administrative expense as 22.3%    28.0%     28.9%    26.1%
a percentage of total revenues
Depreciation and amortization         71       292       51       414
Gain on sales of assets               (14)     (233)     (163)    (410)
Total costs and expenses              6,723    9,961     1,841    18,525
Operating income                      $ 66     $ 39      $ 107    $ 212
Number of:
Kmart Stores                          1,261    —         —        1,261
Full-Line Stores                      —        814       122      936
Specialty Stores                      —        1,282     369      1,651
Total Stores                          1,261    2,096     491      3,848







Sears Holdings Corporation
Adjusted EBITDA
Amounts are Preliminary and
Subject to Change
             13 Weeks Ended
             August3, 2013                      July28, 2012
millions     Kmart   Sears     Sears   Sears     Kmart  Sears     Sears   Sears
                     Domestic  Canada  Holdings         Domestic  Canada  Holdings
Operating
income
(loss) per   $ (56)  $  (146)  $ 151   $  (51)   $ (4)  $  (82)   $ (17)  $  (103)
statement of
operations
Depreciation
and          33      129       25      187       38     149       25      212
amortization
Gain on
sales of     (15)    (45)      (181)   (241)     (9)    (5)       (1)     (15)
assets
Before
excluded     (38)    (62)      (5)     (105)     25     62        7       94
items
Closed store
reserve and  8       2         —       10        8      8         2       18
severance
Domestic
pension      —       40        —       40        —      41        —       41
expense
Adjusted     $ (30)  $  (20)   $ (5)   $  (55)   $ 33   $  111    $ 9     $  153
EBITDA
SHO          —       —         —       —         —      (37)      —       (37)
separation
Adjusted
EBITDA as    $ (30)  $  (20)   $ (5)   $  (55)   $ 33   $  74     $ 9     $  116
defined
% to         (0.9)%  (0.4)%    (0.5)%  (0.6)%    1.0%   1.7%      0.9%    1.3%
revenues
             26 Weeks Ended
             August3, 2013                      July28, 2012
millions     Kmart   Sears     Sears   Sears     Kmart  Sears     Sears   Sears
                     Domestic  Canada  Holdings         Domestic  Canada  Holdings
Operating
income
(loss) per   $ (84)  $  (327)  $ 113   $  (298)  $ 66   $  39     $ 107   $  212
statement of
operations
Depreciation
and          66      262       50      378       71     292       51      414
amortization
Gain on
sales of     (28)    (46)      (181)   (255)     (14)   (233)     (163)   (410)
assets
Before
excluded     (46)    (111)     (18)    (175)     123    98        (5)     216
items
Closed store
reserve and  16      5         2       23        11     39        2       52
severance
Domestic
pension      —       81        —       81        —      82        —       82
expense
Impairment   —       8         —       8         —      —         —       —
charges
Adjusted     $ (30)  $  (17)   $ (16)  $  (63)   $ 134  $  219    $ (3)   $  350
EBITDA
SHO          —       —         —       —         —      (74)      —       (74)
separation
Adjusted
EBITDA as    $ (30)  $  (17)   $ (16)  $  (63)   $ 134  $  145    $ (3)   $  276
defined
% to         (0.5)%  (0.2)%    (0.9)%  (0.4)%    2.0%   1.7%      (0.2)%  1.6%
revenues





Sears Holdings Corporation
Adjusted Earnings per Share
Amounts are
Preliminary and
Subject to
Change
                13 Weeks Ended August 3, 2013
                          Adjustments
millions,                 Domestic   ClosedStore  Gain on   Tax      As
except per      GAAP      Pension    Reserve and   Sales of  Matters  Adjusted
share data                Expense    Severance     Assets
Gross margin    $ 2,186   $  —       $    7        $ —       $  —     $ 2,193
impact
Selling and
administrative  2,291     (40)       (3)           —         —        2,248
impact
Depreciation
and             187       —          (1)           —         —        186
amortization
impact
Gain on sales
of assets       (241)     —          —             235       —        (6)
impact
Operating loss  (51)      40         11            (235)     —        (235)
impact
Income tax      (30)      (15)       (4)           89        65       105
expense impact
Income
attributable to (67)      —          —             88        —        21
noncontrolling
interest impact
After tax and
noncontrolling  (194)     25         7             (58)      65       (155)
interest impact
Diluted loss
per share       $ (1.83)  $  0.24    $    0.07     $ (0.55)  $  0.61  $ (1.46)
impact

               13 Weeks Ended July 28, 2012
                         Adjustments
millions,                Domestic   ClosedStore  Mark-to-  As
except per     GAAP      Pension    Reserveand   Market    Adjusted  SHO         As
share data               Expense    Severance     Gains     -         Separation  Adjusted^(1)
                                                            Reported
Gross margin   $ 2,531   $  —       $    —        $ —       $ 2,531   $  (160)    $   2,371
impact
Selling and
administrative 2,437     (41)       (18)          —         2,378     (124)       2,254
impact
Depreciation
and            212       —          (7)           —         205       (2)         203
amortization
impact
Operating loss (103)     41         25            —         (37)      (34)        (71)
impact
Other income   1         —          —             (1)       —         (1)         (1)
impact
Income tax     25        (15)       (9)           —         1         14          15
benefit impact
After tax and
noncontrolling (132)     26         16            (1)       (91)      (21)        (112)
interest
impact
Diluted loss
per share      $ (1.25)  $  0.25    $    0.15     $ (0.01)  $ (0.86)  $  (0.20)   $   (1.06)
impact

     Adjusted to reflect the results of the Sears Hometown and Outlet
^(1) businesses that were included in our results of operations prior to the
     separation.





Sears Holdings Corporation
Adjusted Earnings per Share
Amounts are
Preliminary and
Subject to
Change
                26 Weeks Ended August 3, 2013
                           Adjustments
                                     ClosedStore
millions,                  Domestic  Reserve,      Gain on
except per      GAAP       Pension   Store         Sales of  Tax      As
share data                 Expense   Impairments   Assets    Matters  Adjusted
                                     and
                                     Severance
Gross margin    $  4,342   $  —      $    15       $ —       $  —     $ 4,357
impact
Selling and
administrative  4,509      (81)      (8)           —         —        4,420
impact
Depreciation
and             378        —         (2)           —         —        376
amortization
impact
Impairment      8          —         (8)           —         —        —
charges impact
Gain on sales
of assets       (255)      —         —             235       —        (20)
impact
Operating loss  (298)      81        33            (235)     —        (419)
impact
Income tax      (21)       (30)      (13)          89        170      195
expense impact
Income
attributable to (54)       —         (1)           88        —        33
noncontrolling
interest impact
After tax and
noncontrolling  (473)      51        19            (58)      170      (291)
interest impact
Diluted loss
per share       $  (4.46)  $  0.49   $    0.18     $ (0.55)  $  1.60  $ (2.74)
impact

                26 Weeks Ended July 28, 2012
                        Adjustments
millions,               Domestic  ClosedStore  Gain on             As
except per     GAAP     Pension   Reserveand   Sales of  Tax       Adjusted  SHO         As
share data              Expense   Severance     Assets    Matters   -         Separation  Adjusted^(1)
                                                                    Reported
Gross margin   $ 5,098  $  —      $    —        $ —       $ —       $ 5,098   $  (319)    $   4,779
impact
Selling and
administrative 4,882    (82)      (52)          —         —         4,748     (246)       4,502
impact
Depreciation
and            414      —         (7)           —         —         407       (5)         402
amortization
impact
Gain on sales
of assets      (410)    —         —             386       —         (24)      —           (24)
impact
Operating      212      82        59            (386)     —         (33)      (68)        (101)
income impact
Income tax     (42)     (31)      (22)          145       (37)      13        27          40
expense impact
Income
attributable
to             (4)      —         —             8         —         4         —           4
noncontrolling
interest
impact
After tax and
noncontrolling 57       51        37            (233)     (37)      (125)     (42)        (167)
interest
impact
Diluted
earnings per   $ 0.54   $  0.48   $    0.35     $ (2.20)  $ (0.35)  $ (1.18)  $  (0.40)   $   (1.58)
share impact

     Adjusted to reflect the results of the Sears Hometown and Outlet
^(1) businesses that were included in our results of operations prior to the
     separation.



SOURCE Sears Holdings Corporation

Website: http://www.searsholdings.com
 
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