Sears Holdings Corporation ("Holdings") (NASDAQ: SHLD) today announced domestic comparable store sales for the nine-week period ended December 31, 2005 for its Kmart and Sears stores. Kmart comparable store sales increased by 1.0% as higher apparel sales were partially offset by a decline in home goods. Sears domestic comparable store sales declined by 11.9% reflecting a reduction in certain promotional events intended to improve gross margin and poor apparel sales due to weaker than anticipated customer response to fashion offerings.
In its Current Report on Form 8-K furnished to the SEC on December 6, 2005, Holdings reported pro forma net income of $589 million, or $3.61 per fully diluted share, for the 13 weeks ended January 26, 2005. The pro forma results were prepared as though Kmart and Sears had been combined as of the beginning of 2004 but were not adjusted to reflect any operating efficiencies that have been, or may be realized as a result of the combination. Holdings currently expects that net income for its fourth quarter ending January 28, 2006 will be between $570 million and $635 million, or between $3.55 and $3.95 per fully diluted share. The results contemplate an estimated $15 million of pretax gains ($9 million after-tax) from the sale of assets during the quarter. The earnings estimates do not include the approximately $40 million pretax gain ($25 million after-tax) from the sale of the Kmart headquarters which closed on December 20, 2005 and which gain will be recognized for accounting purposes when the subdivision of the property is recorded by the municipality. The prior year's fourth quarter pro forma results include $35 million of pretax gains ($22 million after-tax) on the sale of assets. The expected results are preliminary and subject to change based on actual performance in January, as well as year-end adjustments. Holdings currently expects to end the fiscal year with over $3.5 billion in cash excluding Sears Canada. The expected results and cash balance indicated do not give effect to any share repurchase activity after December 31, 2005. Holdings expects to release its fourth quarter and full-year financial results on or about March 15, 2006 and does not intend to update this information prior to that date.
Currently, Holdings has no plans to close stores other than in the ordinary course of business, primarily as a result of lease expirations or terminations.
Sears Canada completed the sale of its credit business in the fourth quarter. The $680 million pretax gain on the sale is expected to be recognized as a component of purchase accounting relating to the merger of Sears Roebuck and Kmart and as such would not affect earnings in the fourth quarter.
During the nine weeks ended December 31, 2005, Holdings repurchased approximately 826,000 shares of its common stock at an average price of $115.43 per share. The remaining authority under Holdings' existing repurchase program is $471 million.
Explanatory Note: The results of Sears Canada are reported to Holdings on a one-month lag basis. As such, Holdings' projected fourth quarter financial results include the results of Sears Canada from October 2, 2005 through December 31, 2005 and the prior year pro forma results include the results of Sears Canada from October 3, 2004 through January 1, 2005.
This release contains guidance on fourth quarter 2005 net income, earnings per share, gains from asset sales and cash position and statements about our current plans concerning store closures. These statements are forward-looking statements based on assumptions about the future that are subject to risks and uncertainties, and actual results may differ materially from the results projected in the forward-looking statements. Risks and uncertainties that may cause actual results to differ materially include: the risk that the businesses of Sears and Kmart will not be integrated successfully; the ability to attract, motivate and retain key executives and other associates; the ability to maintain relationships with clients, employees and suppliers; competitive conditions in the retail and related services industries; changes in consumer confidence, tastes, preferences and spending, including the impact of fuel costs on spending patterns; marketplace demand for the products of Holdings and Holdings' key brand partners, as well as the engagement of appropriate new brand partners; operational or financial difficulties at any of Holdings' business partners; the availability and level of consumer debt; the successful execution of, and customer response to, strategic initiatives, including the full-line store strategy, the conversion of Kmart stores to the Sears Essentials nameplate and the integration of other new store locations; the ability to successfully implement initiatives to improve inventory management capabilities; anticipated cash flow and the ability of Holdings to maintain sufficient operating cash flow and liquidity; changes in interest rates; the outcome of pending and/or future legal proceedings and bankruptcy claims; social and political conditions such as war, political unrest and terrorism or natural disasters; the possibility of negative investment returns in pension plans; volatility in financial markets; changes in debt ratings, credit spreads and cost of funds; the impact of seasonal buying patterns, which are difficult to forecast with certainty; and general economic conditions and normal business uncertainty.
Certain of these and other factors are discussed in more detail in Holdings' filings with the Securities and Exchange Commission and the Annual Reports on Form 10-K of Sears and Kmart for their fiscal years ended January 1 and January 26, 2005, respectively, all of which may be accessed through the Commission's website at http://www.sec.gov/.
While Holdings believes that its forecasts and assumptions are reasonable, it cautions that actual results may differ materially. Holdings intends the forward-looking statements to speak only as of the time made and does not undertake to update or revise them as more information becomes available.
About Sears Holdings Corporation
Sears Holdings Corporation is the nation's third largest broadline retailer, with approximately $55 billion in annual revenues, and 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 one of the leading retailers of tools, lawn and garden, home electronics and automotive repair and maintenance. 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 Martha Stewart Everyday products, which are offered exclusively in the U.S. by Kmart and in Canada by Sears Canada. Holdings is the nation's largest provider of home services, with more than 14 million service calls made annually. For more information, visit Sears Holdings' website at http://www.searsholdings.com/.
SOURCE: Sears Holdings Corporation
CONTACT: Sears Holdings Public Relations, +1-847-286-8371
Web site: http://www.searsholdings.com/