Sears, Roebuck and Co. (NYSE: S) announced today a refinement of its business strategy for The Great Indoors chain of home decorating and remodeling centers to establish a profitable operating model built on the stores' exceptional customer appeal.
Sears anticipates recording an after-tax charge in the range of $75 million to $100 million in the 2003 fiscal third quarter to recognize expenses related to the strategic refinement. The expenses include closure of three under-performing stores, conversion of a fourth store into an outlet format, asset impairment charges for certain stores and other real estate assets, as well as other related costs. The majority of the after-tax charge is anticipated to be for non-cash asset impairment items. The store closures are expected to be completed by year-end.
"The Great Indoors is a viable, important format that has always resonated with customers," said Sears Chairman and CEO Alan J. Lacy. "The business continues to hold great promise."
Jeff Jones, Sears senior vice president and general manager of The Great Indoors, said, "We have high expectations for the future growth of The Great Indoors. Our leadership team has identified the major strengths of the format, as well as opportunities to serve the customer better, while improving the stores' overall operational performance. We are redirecting the stores to further strengthen an already powerful customer proposition, as evidenced by the chain-wide individual store average sales of more than $30 million per year."
Examples of operational enhancements include: * Enhanced inventory management, including greater leverage of the Sears transportation and distribution network and improved product replenishment; * Refined merchandising to embrace even greater product assortment and optimized floor space utilization; and * Improved product sourcing and vendor strategies.
The stores to be closed are located in Arlington, Texas, Willowbrook, Texas and Cincinnati. The store to be converted into an outlet is in Shelby, Mich. Following the closings, The Great Indoors will operate 18 stores in 11 markets nationwide.
On July 17, 2003, Sears announced that it anticipated full year earnings per share to be between $4.80 and $5.00 per share, excluding any impact from the sale of its Credit and Financial Products business. The $75 to $100 million after-tax charge for The Great Indoors was not incorporated within that guidance.
About The Great Indoors
The Great Indoors is the premier idea and solution resource for America's interior decorating and home remodeling needs. Through each of its easy-to- navigate stores, The Great Indoors showcases more than 80,000 products, as well as a selection of more than 700,000 special order items. The Great Indoors is part of the Retail and Related Services business segment of Sears, Roebuck and Co., a broadline retailer with annual revenues in excess of $41 billion.
This release contains guidance on full-year 2003 earnings per share as well as other company performance measures. 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 competitive conditions in retail and credit; changes in consumer confidence and spending; the successful strategic refinement of the business strategy for The Great Indoors; delinquency and charge-off trends in the credit card portfolio; consumer debt levels and the level of consumer bankruptcies; the success of initiatives to address increased delinquencies and credit losses and improve credit profitability; the success of the full- line store strategy and other strategies; the possibility that the company will identify new business and strategic options for one or more of its business segments, potentially including selective acquisitions, dispositions, restructurings, joint ventures and partnerships; Sears' ability to integrate and operate Lands' End successfully; the successful integration of Sears retail businesses with a third-party credit card program, which involves significant training and the integration of complex systems and processes; the outcome of pending legal proceedings; anticipated cash flow; social and political conditions such as war, political unrest and terrorism or natural disasters; the possibility of negative investment returns in the company's pension plan; changes in interest rates; the volatility in financial markets; changes in the company's debt ratings, credit spreads and cost of funds; the possibility of interruptions in systematically accessing the public debt markets; general economic conditions and normal business uncertainty. In addition, Sears typically earns a disproportionate share of its operating income in the fourth quarter due to seasonal buying patterns, which are difficult to forecast with certainty. The company intends these forward- looking statements to speak only as of the time of this release and does not undertake to update or revise them, as more information becomes available.
SOURCE: Sears, Roebuck and Co.
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