Sears Holdings Announces Comparable Store Sales and Fourth Quarter Outlook

HOFFMAN ESTATES, Ill., Jan. 11, 2011 /PRNewswire-FirstCall/ -- Sears Holdings Corporation ("Holdings," "we," "us," "our" or the "Company") (Nasdaq: SHLD) today announced domestic comparable store sales for the five-week ("December"), quarter-to-date ("QTD") and year-to-date ("YTD") periods ended January 1, 2011 for its Kmart and Sears stores as follows:

Kmart's quarter-to-date comparable store sales continued to benefit from our layaway program as well as from increases in the toys, home, sporting goods, apparel and footwear categories.  These increases were partially offset by declines in the food and consumables and pharmacy categories.  Sears Domestic's sales decline was primarily driven by the hardlines categories. Over half of the decline occurred in consumer electronics with appliances and tools also experiencing declines.  In contrast, Sears footwear, jewelry, and automotive categories generated comparable store sales growth during the quarter-to-date period.

We currently expect net income attributable to Holdings' shareholders for the quarter ending January 29, 2011 will be between $370 million and $450 million, or between $3.39 and $4.12 per diluted share.  Our expectation of fourth quarter net income attributable to Holdings' shareholders and earnings per share attributable to Holdings' shareholders excludes the potential impact, if any, related to store closings and impairment charges, restructuring activities including severance, and mark-to-market gains and losses on hedge transactions executed by Sears Canada.  We expect the fourth quarter effective tax rate to be approximately 32%, due to the favorable resolution of certain federal and state income tax matters.  In the fourth quarter of the prior year, the Company reported net income attributable to Holdings' shareholders of $430 million, or $3.74 per diluted share.  

For the full year ending January 29, 2011, the Company expects net income attributable to Holdings' shareholders to be between $130 million and $210 million, or between $1.16 and $1.88 per diluted share, which also excludes the potential fourth quarter impact, if any, related to store closings and impairment charges, restructuring activities including severance, and mark-to-market gains and losses on hedge transactions executed by Sears Canada.  For the full year ended January 30, 2010, the Company reported net income attributable to Holdings' shareholders of $235 million, or $1.99 per diluted share.  

Financial Position

We currently expect to end the fiscal year with approximately $1.1 billion in net cash balances (cash less commercial paper borrowings).  Approximately $600 million of net cash is expected domestically and $500 million at Sears Canada.  The expected net cash balances do not give effect to any share repurchase activity after January 10, 2011.  We currently expect to end the fiscal year with approximately $8.3 billion in domestic merchandise inventories.  

There were no borrowings outstanding on our domestic revolver at the end of December and no revolver borrowings are expected through January 29, 2011.  Further, letters of credit issued are expected to be approximately $400 million at January 29, 2011, down from $646 million last year.  Accordingly, we expect to have approximately $2.0 billion of availability on the domestic revolver at fiscal year end.

During the fourth quarter through January 10, 2011, we repurchased 1.2 million common shares at a total cost of $77 million (or $66.35 per share) under our share repurchase program.  As of January 10, 2011, we had remaining authorization to repurchase $187 million of common shares under the previously approved programs.

Adjusted EBITDA

The Company expects to report total Adjusted EBITDA (consisting of Kmart, Sears Domestic and Sears Canada segments) of $1.415 billion to $1.525 billion in the current year, which is computed as follows:

• expected net income attributable to Holdings' shareholders of $130 million to $210 million;
• plus income statement line items not included in EBITDA consisting of noncontrolling interest income, income taxes, interest expense, interest and investment income, depreciation expense and gains on sales of assets through January 10, 2011 of $1.150 billion to $1.180 billion;
• less domestic pension expense and closed store / severance costs not included in Adjusted EBITDA of $135 million.  

Our expectation of fourth quarter operating income excludes the potential impact, if any, related to store closings and impairment charges and restructuring activities including severance.  For further discussion of the reconciling items, see the Company's press release on third quarter results issued on November 18, 2010.  

Fourth Quarter Earnings Release

The company currently plans to release financial results for its fiscal 2010 fourth quarter and full year on or about February 24, 2011, before the market opens.

Forward-Looking Statements  

Results are preliminary and unaudited. This press release contains forward-looking statements about our expectations for the fourth quarter of fiscal 2010. 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 inventory management and other capabilities; competitive conditions in the retail and related services industries; worldwide economic conditions and business uncertainty, the availability of consumer and commercial credit, changes in consumer confidence, tastes, preferences and spending, and changes in vendor relationships; 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; 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; 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. 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 the nation's fourth largest broadline retailer with approximately 3,900 full-line and specialty retail stores in the United States and Canada.  Sears Holdings is the leading home appliance retailer as well as a leader in tools, lawn and garden, consumer electronics and automotive repair and maintenance.  Sears Holdings is the 2010 ENERGY STAR® Retail Partner of the Year.  Key proprietary brands include Kenmore, Craftsman and DieHard, and a broad apparel offering, including such well-known labels as Lands' End, Jaclyn Smith and Joe Boxer, as well as the Apostrophe and Covington brands.  It also has the Country Living collection, which is offered by Sears and Kmart.  We are the nation's largest provider of home services, with more than 12 million service calls made annually.  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.

SOURCE Sears Holdings Corporation