Sears Holdings Reports Third Quarter Results
HOFFMAN ESTATES, Ill., Nov. 18, 2010 /PRNewswire-FirstCall/ -- Sears Holdings Corporation ("Holdings," "we," "us," "our" or the "Company") (Nasdaq: SHLD) today reported its third quarter 2010 results. In summary, we reported:
-- Net losses attributable to Holdings' shareholders for the quarter of
$218 million, or $1.98 per diluted share, in 2010 and $127 million, or
$1.09 per diluted share, in 2009;
-- Adjusted EBITDA for the quarter of $(38) million, as compared to $161
million in the third quarter last year due to declines in our Sears
segments;
-- Kmart continued to improve profitability as Adjusted EBITDA increased by
$24 million and gross margin rate increased 90 basis points over the
third quarter last year; and
-- Holdings issued $1.25 billion of term debt and had no borrowings
outstanding on our domestic revolving credit facility (our "revolver")
at the end of the quarter as compared to $1.3 billion last year.
"While Kmart improved profitability, our third quarter results were disappointing, in large part due to lower sales of apparel and appliances at Sears," said W. Bruce Johnson, Sears Holdings' interim chief executive officer and president. "Our seasonal apparel sales were down, with the unusually warm weather being a contributing factor. Additionally, during the quarter we reduced our usage of short-term borrowings as we issued $1.25 billion of 6 5/8% senior secured notes. As such, we had no borrowings outstanding on the revolver in contrast to last year's balance of $1.3 billion."
Third Quarter Revenues and Comparable Store Sales
Total revenues decreased $512 million to $9.7 billion for the quarter ended October 30, 2010, as compared to total revenues of $10.2 billion for the quarter ended October 31, 2009. The decline in total revenue for the quarter was primarily a result of a 4.8% decrease in domestic comparable store sales and the effect of having fewer Kmart and Sears Full-line stores in operation, partially offset by an increase of $54 million due to changes in the Canadian foreign exchange rate.
The domestic comparable store sales decrease included declines of 0.7% at Kmart and 8.2% at Sears Domestic. Kmart's quarterly decrease in comparable store sales was primarily driven by the food and consumables and pharmacy categories. The decline in these categories was partially offset by increases in the apparel, toys, consumer electronics and sporting goods categories.
Sears Domestic's sales decline was primarily driven by declines in the home appliances, apparel, and consumer electronics categories, all of which experienced a greater decrease in the month of October. Sears footwear, jewelry, home categories and tires experienced comparable store sales growth during the quarter. The decline in sales of home appliances primarily resulted from overall softness in the appliance market, a lower average selling price realized during the quarter and the effects of delays in transition to new Kenmore products during the quarter. Both Sears and Lands' End experienced declines in their seasonal apparel businesses with the unseasonably warm weather being a contributing factor.
Operating Loss
Holdings' operating loss for the quarter was $292 million in 2010 and $106 million in 2009. The increase in our operating loss of $186 million was primarily the result of a decline in sales coupled with a margin rate reduction of 80 basis points, which resulted in a decrease in our gross margin of $214 million. Sears Domestic's gross margin rate decreased 130 basis points mainly due to reduced margins in home services and appliances, while Sears Canada's gross margin rate declined 280 basis points during the quarter due to increased promotional and clearance markdowns. These declines were partially offset by an increase in gross margin rate of 90 basis points at Kmart in part because of an increase in sales of higher margin categories such as apparel and sporting goods.
Selling and administrative expenses were slightly lower than last year even though we incurred incremental expenses of $30 million related to our continued investment in our multi-channel capabilities and the continued promotion of our Shop Your Way Rewards program, as well as an increase of $12 million due to changes in the Canadian foreign exchange rate. Operating income for the third quarter of 2010 and 2009 includes expenses of $35 million and $54 million, respectively, related to domestic pension plans, store closings and severance. The impact these and other items had on our operating income and earnings is summarized in the attached schedule, "Adjusted Earnings per Share," which provides a reconciliation from GAAP results to our adjusted earnings amounts, including adjusted earnings per diluted share.
Financial Position
During the third quarter, we executed a number of transactions, which reduced our reliance on our revolver. These transactions included:
-- On September 10, 2010, our Sears Canada subsidiary entered into a
five-year CAD $800 million credit facility. At October 30, 2010, Sears
Canada had drawn approximately CAD $480 million on the facility, and
including letters of credit, had a remaining capacity of approximately
CAD $310 million.
-- On September 15, 2010, Sears Holdings and Sears Canada executed an
inter-company loan whereby Sears Holdings borrowed $389 million from
Sears Canada. Sears Holdings used the loan proceeds to fund its
seasonal working capital build for the holiday selling season, thereby
reducing borrowings on its credit facility. The inter-company loan was
repaid in full to Sears Canada on November 12, 2010.
-- On October 12, 2010, Sears Holdings issued $1.25 billion of 6 5/8%
senior secured notes due 2018. Holdings domestic pension plan purchased
$250 million of these notes.
Largely because of these transactions, there were no borrowings outstanding on our revolver at the end of the third quarter in 2010, in contrast to the third quarter 2009 when we had $1.3 billion of borrowings outstanding. We had $558 million of letters of credit outstanding on the revolver at the end of the quarter, leaving remaining availability of $1.9 billion. We finished the third quarter with total debt (consisting of short-term borrowings, long-term debt and capitalized lease obligations) of $4.0 billion, up from $3.8 billion at October 31, 2009.
We had cash balances of $806 million at October 30, 2010 ($521 million domestic and $285 million at Sears Canada), as compared to balances of $1.5 billion at October 31, 2009 and $1.7 billion at January 30, 2010. Uses of cash during the first nine months of the year included $560 million for the purchase of additional interest in Sears Canada, repayments of long-term debt of $468 million, $317 million for share repurchases, contributions to our pension and post-retirement benefit plans of $253 million, and cash used to fund seasonal increases in working capital.
Merchandise inventories at October 30, 2010 were $11.2 billion, as compared to $10.8 billion at October 31, 2009. Domestic inventory increased approximately $300 million from $9.9 billion at October 31, 2009 to $10.2 billion at October 30, 2010. The increase was primarily at Kmart and was due to increased investment in the better performing apparel, toys, footwear and sporting good categories, as well as higher inventory balances for items on layaway. Sears Domestic inventory increased due to layaway and increases in tire and appliance merchandise, partially offset by lower consumer electronics balances. Sears Canada's inventory levels increased approximately $125 million from October 31, 2009 to $993 million at October 30, 2010 primarily due to the change in exchange rates, lower third quarter sales and the timing of merchandise receipts.
Share Repurchase
During the 13- and 39- week periods ended October 30, 2010, we repurchased common shares at a total cost of $44 million and $317 million, respectively, under our share repurchase program. Our repurchases for the 13- and 39- week periods ended October 30, 2010 were made at average prices of $61.35 and $73.21 per share, respectively. During the first three quarters of fiscal 2010, we repurchased a total of 4.3 million shares. At October 30, 2010, we had remaining authorization to repurchase $264 million of common shares under the share repurchase program. The share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods. Timing will be dependent on prevailing market conditions, alternative uses of capital and other factors.
Adjusted EBITDA
For purposes of evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") measurement computed as net loss attributable to Sears Holdings Corporation appearing on the statements of operations excluding income attributable to noncontrolling interest, income tax benefit, interest expense, interest and investment income, other loss, depreciation and amortization and gains 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:
-- EBITDA excludes the effects of financing and investing activities by
eliminating the effects of interest and depreciation costs;
-- Management considers gains/losses on the sale of assets to result from
investing decisions rather than ongoing operations; and
-- 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 October October October
30, 31, 30, 31,
2010 2009 2010 2009
-------- -------- -------- --------
Net loss attributable to SHC
per statement of operations $(218) $(127) $(241) $(195)
Income attributable to
noncontrolling interest 3 15 9 31
Income tax benefit (147) (66) (151) (94)
Interest expense 77 72 213 194
Interest and investment income (7) (5) (28) (24)
Other loss - 5 9 52
--- --- --- ---
Operating loss (292) (106) (189) (36)
Depreciation and amortization 219 224 661 678
Gain on sales of assets - (11) (53) (70)
--- ---
Before excluded items (73) 107 419 572
Domestic pension expense 31 44 88 128
Closed store reserve and
severance 4 10 13 88
Adjusted EBITDA as defined $(38) $161 $520 $788
==== ==== ==== ====
% to revenues (0.4)% 1.6% 1.7% 2.6%
Adjusted EBITDA for our segments are as follows:
13 Weeks Ended
--------------
Adjusted EBITDA % To Revenues
--------------- -------------
October October October
30, 31, 30, October
2010 2009 2010 31, 2009
-------- -------- -------- --------
Kmart $(15) $(39) (0.4)% (1.1%)
Sears Domestic (81) 86 (1.6)% 1.6%
Sears Canada (1) 58 114 5.0% 9.4%
--- --- --- ---
Total Adjusted EBITDA $(38) $161 (0.4)% 1.6%
==== ==== ===== ===
(1) Third quarter EBITDA in Canadian dollars was $60 million in 2010
and $122 million in 2009.
39 Weeks Ended
--------------
Adjusted EBITDA % To Revenues
--------------- -------------
October October October
30, 31, 30, October
2010 2009 2010 31, 2009
-------- -------- -------- --------
Kmart $133 $23 1.3% 0.2%
Sears Domestic 206 512 1.3% 3.1%
Sears Canada (1) 181 253 5.4% 7.9%
--- --- --- ---
Total Adjusted EBITDA $520 $788 1.7% 2.6%
==== ==== === ===
(1) The first nine months EBITDA in Canadian dollars was $187 million
in 2010 and $290 million in 2009.
Quarterly Report on Form 10-Q
For a detailed discussion of the Company's financial results, please see the Company's Quarterly Report on Form 10-Q, which will be filed with the Securities and Exchange Commission and posted to the Company's website at http://www.searsholdings.com.
Forward-Looking Statements
Results are preliminary and unaudited. This press release contains forward-looking statements about our expectations for the third 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, including 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.
Sears Holdings Corporation
Consolidated Statements of Operations
(Unaudited)
Amounts are Preliminary and Subject to
Change
13 Weeks Ended
--------------
October October
millions, except per share data 30, 31,
2010 2009
---- ----
REVENUES
Merchandise sales and services $9,678 $10,190
------ -------
COSTS AND EXPENSES
Cost of sales, buying and occupancy 7,121 7,419
Gross margin dollars 2,557 2,771
Gross margin rate 26.4% 27.2%
Selling and administrative 2,630 2,664
Selling and administrative expense as a
percentage of total revenues 27.2% 26.1%
Depreciation and amortization 219 224
Gain on sales of assets - (11)
Total costs and expenses 9,970 10,296
----- ------
Operating loss (292) (106)
Interest expense (77) (72)
Interest and investment income 7 5
Other loss - (5)
--- ---
Loss before income taxes (362) (178)
Income tax benefit 147 66
--- ---
Net loss (215) (112)
Income attributable to noncontrolling
interest (3) (15)
--- ---
NET LOSS ATTRIBUTABLE TO HOLDINGS'
SHAREHOLDERS $(218) $(127)
===== =====
LOSS PER COMMON SHARE ATTRIBUTABLE
TO HOLDINGS' SHAREHOLDERS
Diluted loss per share $(1.98) $(1.09)
Diluted weighted average common shares
outstanding 109.9 116.9
Amounts are Preliminary and Subject to
Change
39 Weeks Ended
--------------
October October
millions, except per share data 30, 31,
2010 2009
---- ----
REVENUES
Merchandise sales and services $30,182 $30,796
------- -------
COSTS AND EXPENSES
Cost of sales, buying and occupancy 21,972 22,357
Gross margin dollars 8,210 8,439
Gross margin rate 27.2% 27.4%
Selling and administrative 7,791 7,867
Selling and administrative expense as a
percentage of total revenues 25.8% 25.5%
Depreciation and amortization 661 678
Gain on sales of assets (53) (70)
Total costs and expenses 30,371 30,832
------ ------
Operating loss (189) (36)
Interest expense (213) (194)
Interest and investment income 28 24
Other loss (9) (52)
--- ---
Loss before income taxes (383) (258)
Income tax benefit 151 94
--- ---
Net loss (232) (164)
Income attributable to noncontrolling
interest (9) (31)
--- ---
NET LOSS ATTRIBUTABLE TO HOLDINGS'
SHAREHOLDERS $(241) $(195)
===== =====
LOSS PER COMMON SHARE ATTRIBUTABLE
TO HOLDINGS' SHAREHOLDERS
Diluted loss per share $(2.15) $(1.64)
Diluted weighted average common shares
outstanding 112.3 119.2
Sears Holdings Corporation
Condensed Consolidated Balance Sheets
Amounts are Preliminary and Subject to
Change
(Unaudited)
-----------
October October January
millions 30, 31, 30,
2010 2009 2010
---- ---- ----
ASSETS
Current assets
Cash and cash equivalents $790 $1,468 $1,689
Restricted cash 16 59 11
Receivables 688 844 652
Merchandise inventories 11,226 10,805 8,705
Prepaid expenses and other current assets 403 395 381
--- --- ---
Total current assets 13,123 13,571 11,438
Property and equipment, net 7,448 7,758 7,709
Goodwill 1,392 1,392 1,392
Trade names and other intangible assets 3,156 3,225 3,208
Other assets 926 1,229 1,061
--- -----
TOTAL ASSETS $26,045 $27,175 $24,808
======= ======= =======
LIABILITIES
Current liabilities
Short-term borrowings $968 $1,603 $325
Current portion of long-term debt and
capitalized lease obligations 499 369 482
Merchandise payables 4,616 4,495 3,335
Unearned revenues 983 1,016 1,012
Accrued expenses and other current
liabilities 3,616 3,783 3,632
----- ----- -----
Total current liabilities 10,682 11,266 8,786
Long-term debt and capitalized lease
obligations 2,570 1,831 1,698
Pension and post-retirement benefits 2,055 2,001 2,271
Other long-term liabilities 2,360 2,752 2,618
----- -----
Total Liabilities 17,667 17,850 15,373
------ ------ ------
Total Equity 8,378 9,325 9,435
----- ----- -----
TOTAL LIABILITIES AND EQUITY $26,045 $27,175 $24,808
======= ======= =======
Total common shares outstanding 110.0 115.6 114.8
Sears Holdings Corporation
Segment Results
(Unaudited)
Amounts are
Preliminary and
Subject to
Change
13 Weeks Ended October 30, 2010
-------------------------------
millions, except Sears Sears Sears
store data Kmart Domestic Canada Holdings
----- --------- ------ ---------
Merchandise
sales and
services $3,381 $5,142 $1,155 $9,678
------ ------ ------ ------
Cost of sales,
buying and
occupancy 2,586 3,723 812 7,121
Gross margin
dollars 795 1,419 343 2,557
Gross margin
rate 23.5% 27.6% 29.7% 26.4%
Selling and
administrative 814 1,531 285 2,630
Selling and
administrative
expense as a 24.1% 29.8% 24.7% 27.2%
percentage of
total revenues
Depreciation and
amortization 37 159 23 219
Gain on sales of
assets - - - -
Total costs and
expenses 3,437 5,413 1,120 9,970
----- ----- ----- -----
Operating income
(loss) $(56) $(271) $35 $(292)
==== ===== === =====
Number of:
Kmart Stores 1,312 - - 1,312
Full-Line
Stores - 894 122 1,016
Specialty Stores - 1,340 334 1,674
Total Stores 1,312 2,234 456 4,002
===== ===== === =====
13 Weeks Ended October 31, 2009
-------------------------------
millions, except Sears Sears Sears
store data Kmart Domestic Canada Holdings
----- --------- ------ ---------
Merchandise
sales and
services $3,476 $5,507 $1,207 $10,190
------ ------ ------ -------
Cost of sales,
buying and
occupancy 2,690 3,914 815 7,419
Gross margin
dollars 786 1,593 392 2,771
Gross margin
rate 22.6% 28.9% 32.5% 27.2%
Selling and
administrative 830 1,556 278 2,664
Selling and
administrative
expense as a 23.9% 28.3% 23.0% 26.1%
percentage of
total revenues
Depreciation and
amortization 37 162 25 224
Gain on sales of
assets (9) (2) - (11)
Total costs and
expenses 3,548 5,630 1,118 10,296
----- ----- ----- ------
Operating income
(loss) $(72) $(123) $89 $(106)
==== ===== === =====
Number of:
Kmart Stores 1,343 - - 1,343
Full-Line
Stores - 912 122 1,034
Specialty Stores - 1,268 269 1,537
Total Stores 1,343 2,180 391 3,914
===== ===== === =====
Sears Holdings Corporation
Segment Results
(Unaudited)
Amounts are
Preliminary
and Subject to
Change
39 Weeks Ended October 30, 2010
-------------------------------
millions,
except store Sears Sears Sears
data Kmart Domestic Canada Holdings
----- --------- ------ ---------
Merchandise
sales and
services $10,594 $16,251 $3,337 $30,182
------- ------- ------ -------
Cost of sales,
buying and
occupancy 8,043 11,596 2,333 21,972
Gross margin
dollars 2,551 4,655 1,004 8,210
Gross margin
rate 24.1% 28.6% 30.1% 27.2%
Selling and
administrative 2,426 4,542 823 7,791
Selling and
administrative
expense as a 22.9% 27.9% 24.7% 25.8%
percentage of
total revenues
Depreciation
and
amortization 109 479 73 661
Gain on sales
of assets (6) (47) - (53)
Total costs and
expenses 10,572 16,570 3,229 30,371
------ ------ ----- ------
Operating
income (loss) $22 $(319) $108 $(189)
=== ===== ==== =====
Number of:
Kmart Stores 1,312 - - 1,312
Full-Line
Stores - 894 122 1,016
Specialty
Stores - 1,340 334 1,674
Total Stores 1,312 2,234 456 4,002
===== ===== === =====
39 Weeks Ended October 31, 2009
-------------------------------
millions,
except store Sears Sears Sears
data Kmart Domestic Canada Holdings
----- --------- ------ ---------
Merchandise
sales and
services $10,825 $16,780 $3,191 $30,796
------- ------- ------ -------
Cost of sales,
buying and
occupancy 8,352 11,821 2,184 22,357
Gross margin
dollars 2,473 4,959 1,007 8,439
Gross margin
rate 22.8% 29.6% 31.6% 27.4%
Selling and
administrative 2,489 4,616 762 7,867
Selling and
administrative
expense as a 23.0% 27.5% 23.9% 25.5%
percentage of
total revenues
Depreciation
and
amortization 109 495 74 678
Gain on sales
of assets (19) (6) (45) (70)
Total costs and
expenses 10,931 16,926 2,975 30,832
------ ------ ----- ------
Operating
income (loss) $(106) $(146) $216 $(36)
===== ===== ==== ====
Number of:
Kmart Stores 1,343 - - 1,343
Full-Line
Stores - 912 122 1,034
Specialty
Stores - 1,268 269 1,537
Total Stores 1,343 2,180 391 3,914
===== ===== === =====
Sears Holdings Corporation
Adjusted EBITDA
Amounts are Preliminary and
Subject to Change
13 Weeks Ended
--------------
millions October 30, 2010
----------------
Sears Sears Sears
Kmart Domestic Canada Holdings
----- --------- ------ ---------
Operating income (loss) per
statement of operations $(56) $(271) $35 $(292)
Depreciation and amortization 37 159 23 219
Gain on sales of assets - - - -
--- --- --- ---
Before excluded items (19) (112) 58 (73)
Closed store reserve and
severance 4 - - 4
Domestic pension expense - 31 - 31
Adjusted EBITDA as defined $(15) $(81) $58 $(38)
==== ==== === ====
% to revenues -0.4% -1.6% 5.0% -0.4%
39 Weeks Ended
--------------
millions October 30, 2010
----------------
Sears Sears Sears
Kmart Domestic Canada Holdings
----- --------- ------ ---------
Operating income (loss) per
statement of operations $22 $(319) $108 $(189)
Depreciation and amortization 109 479 73 661
Gain on sales of assets (6) (47) - (53)
--- --- --- ---
Before excluded items 125 113 181 419
Closed store reserve and
severance 8 5 - 13
Domestic pension expense - 88 - 88
Adjusted EBITDA as defined $133 $206 $181 $520
==== ==== ==== ====
% to revenues 1.3% 1.3% 5.4% 1.7%
Amounts are Preliminary and
Subject to Change
13 Weeks Ended
--------------
millions October 31, 2009
----------------
Sears Sears Sears
Kmart Domestic Canada Holdings
----- --------- ------ ---------
Operating income (loss) per
statement of operations $(72) $(123) $89 $(106)
Depreciation and amortization 37 162 25 224
Gain on sales of assets (9) (2) - (11)
--- --- --- ---
Before excluded items (44) 37 114 107
Closed store reserve and
severance 5 5 - 10
Domestic pension expense - 44 - 44
Adjusted EBITDA as defined $(39) $86 $114 $161
==== === ==== ====
% to revenues -1.1% 1.6% 9.4% 1.6%
39 Weeks Ended
--------------
millions October 31, 2009
----------------
Sears Sears Sears
Kmart Domestic Canada Holdings
----- --------- ------ ---------
Operating income (loss) per
statement of operations $(106) $(146) $216 $(36)
Depreciation and amortization 109 495 74 678
Gain on sales of assets (19) (6) (45) (70)
--- --- --- ---
Before excluded items (16) 343 245 572
Closed store reserve and
severance 39 41 8 88
Domestic pension expense - 128 - 128
Adjusted EBITDA as defined $23 $512 $253 $788
=== ==== ==== ====
% to revenues 0.2% 3.1% 7.9% 2.6%
Sears Holdings Corporation
Adjusted Earnings per Share
Amounts are Preliminary and
Subject to Change
13 Weeks Ended October 30, 2010
-------------------------------
Domestic
Pension
millions, except per share data GAAP Expense
---- ---------
Cost of sales, buying and
occupancy impact $7,121 $-
Selling and administrative
impact 2,630 (31)
Operating loss impact (292) 31
Other income (loss) impact - -
Income tax benefit impact 147 (12)
Noncontrolling interest impact (3) -
After tax and noncontrolling
interest impact (218) 19
Diluted loss per share impact $(1.98) 0.18
13 Weeks Ended October 31, 2009
-------------------------------
Domestic
Pension
millions, except per share data GAAP Expense
---- ---------
Cost of sales, buying and
occupancy impact $7,419 $-
Selling and administrative
impact 2,664 (44)
Operating loss impact (106) 44
Other income (loss) impact (5) -
Income tax benefit impact 66 (16)
Noncontrolling interest impact (15) -
After tax and noncontrolling
interest impact (127) 28
Diluted loss per share impact $(1.09) $0.24
39 Weeks Ended October 30, 2010
-------------------------------
Domestic
Pension
millions, except per share data GAAP Expense
---- ---------
Cost of sales, buying and
occupancy impact $21,972 $-
Selling and administrative
impact 7,791 (88)
Gain on sales of assets impact (53) -
Operating loss impact (189) 88
Other income (loss) impact (9) -
Income tax benefit impact 151 (33)
Noncontrolling interest impact (9) -
After tax and noncontrolling
interest impact (241) 55
Diluted loss per share impact $(2.15) $0.49
39 Weeks Ended October 31, 2009
-------------------------------
Domestic
Pension
millions, except per share data GAAP Expense
---- ---------
Cost of sales, buying and
occupancy impact $22,357 $-
Selling and administrative
impact 7,867 (128)
Gain on sales of assets impact (70) -
Operating income impact (36) 128
Other income (loss) impact (52) -
Income tax benefit impact 94 (47)
Noncontrolling interest impact (31) -
After tax and noncontrolling
interest impact (195) 81
Diluted loss per share impact $(1.64) $0.69
Amounts are Preliminary and
Subject to Change
13 Weeks Ended October 30, 2010
-------------------------------
Closed
Store
Reserve Mark-to-
and Market
millions, except per share data Severance Losses
---------- ---------
Cost of sales, buying and
occupancy impact $(3) $-
Selling and administrative
impact (1) -
Operating loss impact 4 -
Other income (loss) impact - (1)
Income tax benefit impact (1) -
Noncontrolling interest impact - -
After tax and noncontrolling
interest impact 3 (1)
Diluted loss per share impact 0.02 (0.01)
13 Weeks Ended October 31, 2009
-------------------------------
Closed
Store
Reserve Mark-to-
and Market
millions, except per share data Severance Gains
---------- ---------
Cost of sales, buying and
occupancy impact $(5) $-
Selling and administrative
impact (5) -
Operating loss impact 10 -
Other income (loss) impact - (2)
Income tax benefit impact (4) 1
Noncontrolling interest impact - -
After tax and noncontrolling
interest impact 6 (1)
Diluted loss per share impact $0.05 $(0.01)
39 Weeks Ended October 30, 2010
-------------------------------
Closed
Store
Reserve Mark-to-
and Market
millions, except per share data Severance Losses
---------- ---------
Cost of sales, buying and
occupancy impact $(5) $-
Selling and administrative
impact (8) -
Gain on sales of assets impact - -
Operating loss impact 13 -
Other income (loss) impact - 1
Income tax benefit impact (4) -
Noncontrolling interest impact - -
After tax and noncontrolling
interest impact 9 1
Diluted loss per share impact $0.09 $0.01
39 Weeks Ended October 31, 2009
-------------------------------
Closed
Store
Reserve Mark-to-
and Market
millions, except per share data Severance Losses
---------- ---------
Cost of sales, buying and
occupancy impact $(22) $-
Selling and administrative
impact (66) -
Gain on sales of assets impact - -
Operating income impact 88 -
Other income (loss) impact - 34
Income tax benefit impact (32) (9)
Noncontrolling interest impact (2) (9)
After tax and noncontrolling
interest impact 54 16
Diluted loss per share impact $0.46 $0.13
Amounts are
Preliminary and
Subject to Change
13 Weeks Ended October 30, 2010
-------------------------------
Canadian
Dividend
millions, except Tax As
per share data Impact Adjusted
--------- ---------
Cost of sales,
buying and
occupancy impact $- $7,118
Selling and
administrative
impact - 2,598
Operating loss
impact - (257)
Other income
(loss) impact - (1)
Income tax benefit
impact 9 143
Noncontrolling
interest impact - (3)
After tax and
noncontrolling
interest impact 9 (188)
Diluted loss per
share impact 0.08 $(1.71)
13 Weeks Ended October 31, 2009
-------------------------------
millions, except As
per share data Adjusted
---------
Cost of sales,
buying and
occupancy impact $7,414
Selling and
administrative
impact 2,615
Operating loss
impact (52)
Other income
(loss) impact (7)
Income tax benefit
impact 47
Noncontrolling
interest impact (15)
After tax and
noncontrolling
interest impact (94)
Diluted loss per
share impact $(0.81)
39 Weeks Ended October 30, 2010
-------------------------------
Gain on Canadian
Sales of Dividend
millions, except Real Tax
per share data Estate Impact
-------- ---------
Cost of sales,
buying and
occupancy impact $- $-
Selling and
administrative
impact - -
Gain on sales of
assets impact 35 -
Operating loss
impact (35) -
Other income
(loss) impact - -
Income tax benefit
impact 14 9
Noncontrolling
interest impact - -
After tax and
noncontrolling
interest impact (21) 9
Diluted loss per
share impact $(0.19) $0.09
39 Weeks Ended October 31, 2009
-------------------------------
Gain on
Sales of
millions, except Real As
per share data Estate Adjusted
-------- ---------
Cost of sales,
buying and
occupancy impact $22,335
Selling and
administrative
impact 7,673
Gain on sales of
assets impact 44 (26)
Operating income
impact (44) 136
Other income
(loss) impact - (18)
Income tax benefit
impact 12 18
Noncontrolling
interest impact 12 (30)
After tax and
noncontrolling
interest impact (20) (64)
Diluted loss per
share impact $(0.17) $(0.53)
SOURCE Sears Holdings Corporation
SOURCE: Sears Holdings Corporation
PR Newswire
HOFFMAN ESTATES, Ill., Nov. 18, 2010
HOFFMAN ESTATES, Ill., Nov. 18, 2010 /PRNewswire-FirstCall/ -- Sears Holdings Corporation ("Holdings," "we," "us," "our" or the "Company") (Nasdaq: SHLD) today reported its third quarter 2010 results. In summary, we reported:
- Net losses attributable to Holdings' shareholders for the quarter of $218 million, or $1.98 per diluted share, in 2010 and $127 million, or $1.09 per diluted share, in 2009;
- Adjusted EBITDA for the quarter of $(38) million, as compared to $161 million in the third quarter last year due to declines in our Sears segments;
- Kmart continued to improve profitability as Adjusted EBITDA increased by $24 million and gross margin rate increased 90 basis points over the third quarter last year; and
- Holdings issued $1.25 billion of term debt and had no borrowings outstanding on our domestic revolving credit facility (our "revolver") at the end of the quarter as compared to $1.3 billion last year.
"While Kmart improved profitability, our third quarter results were disappointing, in large part due to lower sales of apparel and appliances at Sears," said W. Bruce Johnson, Sears Holdings' interim chief executive officer and president. "Our seasonal apparel sales were down, with the unusually warm weather being a contributing factor. Additionally, during the quarter we reduced our usage of short-term borrowings as we issued $1.25 billion of 6 5/8% senior secured notes. As such, we had no borrowings outstanding on the revolver in contrast to last year's balance of $1.3 billion."
Third Quarter Revenues and Comparable Store Sales
Total revenues decreased $512 million to $9.7 billion for the quarter ended October 30, 2010, as compared to total revenues of $10.2 billion for the quarter ended October 31, 2009. The decline in total revenue for the quarter was primarily a result of a 4.8% decrease in domestic comparable store sales and the effect of having fewer Kmart and Sears Full-line stores in operation, partially offset by an increase of $54 million due to changes in the Canadian foreign exchange rate.
The domestic comparable store sales decrease included declines of 0.7% at Kmart and 8.2% at Sears Domestic. Kmart's quarterly decrease in comparable store sales was primarily driven by the food and consumables and pharmacy categories. The decline in these categories was partially offset by increases in the apparel, toys, consumer electronics and sporting goods categories.
Sears Domestic's sales decline was primarily driven by declines in the home appliances, apparel, and consumer electronics categories, all of which experienced a greater decrease in the month of October. Sears footwear, jewelry, home categories and tires experienced comparable store sales growth during the quarter. The decline in sales of home appliances primarily resulted from overall softness in the appliance market, a lower average selling price realized during the quarter and the effects of delays in transition to new Kenmore products during the quarter. Both Sears and Lands' End experienced declines in their seasonal apparel businesses with the unseasonably warm weather being a contributing factor.
Operating Loss
Holdings' operating loss for the quarter was $292 million in 2010 and $106 million in 2009. The increase in our operating loss of $186 million was primarily the result of a decline in sales coupled with a margin rate reduction of 80 basis points, which resulted in a decrease in our gross margin of $214 million. Sears Domestic's gross margin rate decreased 130 basis points mainly due to reduced margins in home services and appliances, while Sears Canada's gross margin rate declined 280 basis points during the quarter due to increased promotional and clearance markdowns. These declines were partially offset by an increase in gross margin rate of 90 basis points at Kmart in part because of an increase in sales of higher margin categories such as apparel and sporting goods.
Selling and administrative expenses were slightly lower than last year even though we incurred incremental expenses of $30 million related to our continued investment in our multi-channel capabilities and the continued promotion of our Shop Your WayRewards program, as well as an increase of $12 million due to changes in the Canadian foreign exchange rate. Operating income for the third quarter of 2010 and 2009 includes expenses of $35 million and $54 million, respectively, related to domestic pension plans, store closings and severance. The impact these and other items had on our operating income and earnings is summarized in the attached schedule, "Adjusted Earnings per Share," which provides a reconciliation from GAAP results to our adjusted earnings amounts, including adjusted earnings per diluted share.
Financial Position
During the third quarter, we executed a number of transactions, which reduced our reliance on our revolver. These transactions included:
- On September 10, 2010, our Sears Canada subsidiary entered into a five-year CAD $800 million credit facility. At October 30, 2010, Sears Canada had drawn approximately CAD $480 million on the facility, and including letters of credit, had a remaining capacity of approximately CAD $310 million.
- On September 15, 2010, Sears Holdings and Sears Canada executed an inter-company loan whereby Sears Holdings borrowed $389 million from Sears Canada. Sears Holdings used the loan proceeds to fund its seasonal working capital build for the holiday selling season, thereby reducing borrowings on its credit facility. The inter-company loan was repaid in full to Sears Canada on November 12, 2010.
- On October 12, 2010, Sears Holdings issued $1.25 billion of 6 5/8% senior secured notes due 2018. Holdings domestic pension plan purchased $250 million of these notes.
Largely because of these transactions, there were no borrowings outstanding on our revolver at the end of the third quarter in 2010, in contrast to the third quarter 2009 when we had $1.3 billion of borrowings outstanding. We had $558 million of letters of credit outstanding on the revolver at the end of the quarter, leaving remaining availability of $1.9 billion. We finished the third quarter with total debt (consisting of short-term borrowings, long-term debt and capitalized lease obligations) of $4.0 billion, up from $3.8 billion at October 31, 2009.
We had cash balances of $806 million at October 30, 2010 ($521 million domestic and $285 million at Sears Canada), as compared to balances of $1.5 billion at October 31, 2009 and $1.7 billion at January 30, 2010. Uses of cash during the first nine months of the year included $560 million for the purchase of additional interest in Sears Canada, repayments of long-term debt of $468 million, $317 million for share repurchases, contributions to our pension and post-retirement benefit plans of $253 million, and cash used to fund seasonal increases in working capital.
Merchandise inventories at October 30, 2010 were $11.2 billion, as compared to $10.8 billion at October 31, 2009. Domestic inventory increased approximately $300 million from $9.9 billion at October 31, 2009 to $10.2 billion at October 30, 2010. The increase was primarily at Kmart and was due to increased investment in the better performing apparel, toys, footwear and sporting good categories, as well as higher inventory balances for items on layaway. Sears Domestic inventory increased due to layaway and increases in tire and appliance merchandise, partially offset by lower consumer electronics balances. Sears Canada's inventory levels increased approximately $125 million from October 31, 2009 to $993 million at October 30, 2010 primarily due to the change in exchange rates, lower third quarter sales and the timing of merchandise receipts.
Share Repurchase
During the 13- and 39- week periods ended October 30, 2010, we repurchased common shares at a total cost of $44 million and $317 million, respectively, under our share repurchase program. Our repurchases for the 13- and 39- week periods ended October 30, 2010 were made at average prices of $61.35 and $73.21 per share, respectively. During the first three quarters of fiscal 2010, we repurchased a total of 4.3 million shares. At October 30, 2010, we had remaining authorization to repurchase $264 million of common shares under the share repurchase program. The share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods. Timing will be dependent on prevailing market conditions, alternative uses of capital and other factors.
Adjusted EBITDA
For purposes of evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") measurement computed as net loss attributable to Sears Holdings Corporation appearing on the statements of operations excluding income attributable to noncontrolling interest, income tax benefit, interest expense, interest and investment income, other loss, depreciation and amortization and gains 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:
- EBITDA excludes the effects of financing and investing activities by eliminating the effects of interest and depreciation costs;
- Management considers gains/losses on the sale of assets to result from investing decisions rather than ongoing operations; and
- 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 30, 2010 | October 31, 2009 | October 30, 2010 | October 31, 2009 | ||||||
Net loss attributable to SHC per statement of operations | $ (218) | $ (127) | $ (241) | $ (195) | |||||
Income attributable to noncontrolling interest | 3 | 15 | 9 | 31 | |||||
Income tax benefit | (147) | (66) | (151) | (94) | |||||
Interest expense | 77 | 72 | 213 | 194 | |||||
Interest and investment income | (7) | (5) | (28) | (24) | |||||
Other loss | - | 5 | 9 | 52 | |||||
Operating loss | (292) | (106) | (189) | (36) | |||||
Depreciation and amortization | 219 | 224 | 661 | 678 | |||||
Gain on sales of assets | - | (11) | (53) | (70) | |||||
Before excluded items | (73) | 107 | 419 | 572 | |||||
Domestic pension expense | 31 | 44 | 88 | 128 | |||||
Closed store reserve and severance | 4 | 10 | 13 | 88 | |||||
Adjusted EBITDA as defined | $ (38) | $ 161 | $ 520 | $ 788 | |||||
% to revenues | (0.4)% | 1.6% | 1.7% | 2.6% | |||||
Adjusted EBITDA for our segments are as follows: | |||||||||
13 Weeks Ended | |||||||||
Adjusted EBITDA | % To Revenues | ||||||||
October 30, 2010 | October 31, 2009 | October 30, 2010 | October 31, 2009 | ||||||
Kmart | $ (15) | $ (39) | (0.4)% | (1.1%) | |||||
Sears Domestic | (81) | 86 | (1.6)% | 1.6% | |||||
Sears Canada (1) | 58 | 114 | 5.0% | 9.4% | |||||
Total Adjusted EBITDA | $ (38) | $ 161 | (0.4)% | 1.6% | |||||
| |||||||||
39 Weeks Ended | |||||||||
Adjusted EBITDA | % To Revenues | ||||||||
October 30, 2010 | October 31, 2009 | October 30, 2010 | October 31, 2009 | ||||||
Kmart | $ 133 | $ 23 | 1.3% | 0.2% | |||||
Sears Domestic | 206 | 512 | 1.3% | 3.1% | |||||
Sears Canada (1) | 181 | 253 | 5.4% | 7.9% | |||||
Total Adjusted EBITDA | $ 520 | $ 788 | 1.7% | 2.6% | |||||
| |||||||||
Quarterly Report on Form 10-Q
For a detailed discussion of the Company's financial results, please see the Company's Quarterly Report on Form 10-Q, which will be filed with the Securities and Exchange Commission and posted to the Company's website at http://www.searsholdings.com.
Forward-Looking Statements
Results are preliminary and unaudited. This press release contains forward-looking statements about our expectations for the third 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, including 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.
Sears Holdings Corporation | |||||||||||
Consolidated Statements of Operations | |||||||||||
(Unaudited) | |||||||||||
Amounts are Preliminary and Subject to Change | |||||||||||
13 Weeks Ended | 39 Weeks Ended | ||||||||||
millions, except per share data | October 30, | October 31, | October 30, | October 31, | |||||||
2010 | 2009 | 2010 | 2009 | ||||||||
REVENUES | |||||||||||
Merchandise sales and services | $ 9,678 | $ 10,190 | $ 30,182 | $ 30,796 | |||||||
COSTS AND EXPENSES | |||||||||||
Cost of sales, buying and occupancy | 7,121 | 7,419 | 21,972 | 22,357 | |||||||
Gross margin dollars | 2,557 | 2,771 | 8,210 | 8,439 | |||||||
Gross margin rate | 26.4% | 27.2% | 27.2% | 27.4% | |||||||
Selling and administrative | 2,630 | 2,664 | 7,791 | 7,867 | |||||||
Selling and administrative expense as a percentage of total revenues | 27.2% | 26.1% | 25.8% | 25.5% | |||||||
Depreciation and amortization | 219 | 224 | 661 | 678 | |||||||
Gain on sales of assets | - | (11) | (53) | (70) | |||||||
Total costs and expenses | 9,970 | 10,296 | 30,371 | 30,832 | |||||||
Operating loss | (292) | (106) | (189) | (36) | |||||||
Interest expense | (77) | (72) | (213) | (194) | |||||||
Interest and investment income | 7 | 5 | 28 | 24 | |||||||
Other loss | - | (5) | (9) | (52) | |||||||
Loss before income taxes | (362) | (178) | (383) | (258) | |||||||
Income tax benefit | 147 | 66 | 151 | 94 | |||||||
Net loss | (215) | (112) | (232) | (164) | |||||||
Income attributable to noncontrolling interest | (3) | (15) | (9) | (31) | |||||||
NET LOSS ATTRIBUTABLE TO HOLDINGS' | |||||||||||
SHAREHOLDERS | $ (218) | $ (127) | $ (241) | $ (195) | |||||||
LOSS PER COMMON SHARE ATTRIBUTABLE | |||||||||||
TO HOLDINGS' SHAREHOLDERS | |||||||||||
Diluted loss per share | $ (1.98) | $ (1.09) | $ (2.15) | $ (1.64) | |||||||
Diluted weighted average common shares outstanding | 109.9 | 116.9 | 112.3 | 119.2 | |||||||
Sears Holdings Corporation | |||||||
Condensed Consolidated Balance Sheets | |||||||
Amounts are Preliminary and Subject to Change | |||||||
(Unaudited) | |||||||
millions | October 30, | October 31, | January 30, | ||||
2010 | 2009 | 2010 | |||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ 790 | $ 1,468 | $ 1,689 | ||||
Restricted cash | 16 | 59 | 11 | ||||
Receivables | 688 | 844 | 652 | ||||
Merchandise inventories | 11,226 | 10,805 | 8,705 | ||||
Prepaid expenses and other current assets | 403 | 395 | 381 | ||||
Total current assets | 13,123 | 13,571 | 11,438 | ||||
Property and equipment, net | 7,448 | 7,758 | 7,709 | ||||
Goodwill | 1,392 | 1,392 | 1,392 | ||||
Trade names and other intangible assets | 3,156 | 3,225 | 3,208 | ||||
Other assets | 926 | 1,229 | 1,061 | ||||
TOTAL ASSETS | $ 26,045 | $ 27,175 | $ 24,808 | ||||
LIABILITIES | |||||||
Current liabilities | |||||||
Short-term borrowings | $ 968 | $ 1,603 | $ 325 | ||||
Current portion of long-term debt and capitalized lease obligations | 499 | 369 | 482 | ||||
Merchandise payables | 4,616 | 4,495 | 3,335 | ||||
Unearned revenues | 983 | 1,016 | 1,012 | ||||
Accrued expenses and other current liabilities | 3,616 | 3,783 | 3,632 | ||||
Total current liabilities | 10,682 | 11,266 | 8,786 | ||||
Long-term debt and capitalized lease obligations | 2,570 | 1,831 | 1,698 | ||||
Pension and post-retirement benefits | 2,055 | 2,001 | 2,271 | ||||
Other long-term liabilities | 2,360 | 2,752 | 2,618 | ||||
Total Liabilities | 17,667 | 17,850 | 15,373 | ||||
Total Equity | 8,378 | 9,325 | 9,435 | ||||
TOTAL LIABILITIES AND EQUITY | $ 26,045 | $ 27,175 | $ 24,808 | ||||
Total common shares outstanding | 110.0 | 115.6 | 114.8 | ||||
Sears Holdings Corporation Segment Results (Unaudited) | |||||||||
Amounts are Preliminary and Subject to Change | |||||||||
13 Weeks Ended October 30, 2010 | |||||||||
millions, except store data | Kmart | Sears Domestic | Sears Canada | Sears Holdings | |||||
Merchandise sales and services | $ 3,381 | $ 5,142 | $ 1,155 | $ 9,678 | |||||
Cost of sales, buying and occupancy | 2,586 | 3,723 | 812 | 7,121 | |||||
Gross margin dollars | 795 | 1,419 | 343 | 2,557 | |||||
Gross margin rate | 23.5% | 27.6% | 29.7% | 26.4% | |||||
Selling and administrative | 814 | 1,531 | 285 | 2,630 | |||||
Selling and administrative expense as a | 24.1% | 29.8% | 24.7% | 27.2% | |||||
Depreciation and amortization | 37 | 159 | 23 | 219 | |||||
Gain on sales of assets | - | - | - | - | |||||
Total costs and expenses | 3,437 | 5,413 | 1,120 | 9,970 | |||||
Operating income (loss) | $ (56) | $ (271) | $ 35 | $ (292) | |||||
Number of: | |||||||||
Kmart Stores | 1,312 | - | - | 1,312 | |||||
Full-Line Stores | - | 894 | 122 | 1,016 | |||||
Specialty Stores | - | 1,340 | 334 | 1,674 | |||||
Total Stores | 1,312 | 2,234 | 456 | 4,002 | |||||
13 Weeks Ended October 31, 2009 | |||||||||
millions, except store data | Kmart | Sears Domestic | Sears Canada | Sears Holdings | |||||
Merchandise sales and services | $ 3,476 | $ 5,507 | $ 1,207 | $ 10,190 | |||||
Cost of sales, buying and occupancy | 2,690 | 3,914 | 815 | 7,419 | |||||
Gross margin dollars | 786 | 1,593 | 392 | 2,771 | |||||
Gross margin rate | 22.6% | 28.9% | 32.5% | 27.2% | |||||
Selling and administrative | 830 | 1,556 | 278 | 2,664 | |||||
Selling and administrative expense as a | 23.9% | 28.3% | 23.0% | 26.1% | |||||
Depreciation and amortization | 37 | 162 | 25 | 224 | |||||
Gain on sales of assets | (9) | (2) | - | (11) | |||||
Total costs and expenses | 3,548 | 5,630 | 1,118 | 10,296 | |||||
Operating income (loss) | $ (72) | $ (123) | $ 89 | $ (106) | |||||
Number of: | |||||||||
Kmart Stores | 1,343 | - | - | 1,343 | |||||
Full-Line Stores | - | 912 | 122 | 1,034 | |||||
Specialty Stores | - | 1,268 | 269 | 1,537 | |||||
Total Stores | 1,343 | 2,180 | 391 | 3,914 | |||||
Sears Holdings Corporation Segment Results (Unaudited) | |||||||||
Amounts are Preliminary and Subject to Change | |||||||||
39 Weeks Ended October 30, 2010 | |||||||||
millions, except store data | Kmart | Sears Domestic | Sears Canada | Sears Holdings | |||||
Merchandise sales and services | $ 10,594 | $ 16,251 | $ 3,337 | $ 30,182 | |||||
Cost of sales, buying and occupancy | 8,043 | 11,596 | 2,333 | 21,972 | |||||
Gross margin dollars | 2,551 | 4,655 | 1,004 | 8,210 | |||||
Gross margin rate | 24.1% | 28.6% | 30.1% | 27.2% | |||||
Selling and administrative | 2,426 | 4,542 | 823 | 7,791 | |||||
Selling and administrative expense as a | 22.9% | 27.9% | 24.7% | 25.8% | |||||
Depreciation and amortization | 109 | 479 | 73 | 661 | |||||
Gain on sales of assets | (6) | (47) | - | (53) | |||||
Total costs and expenses | 10,572 | 16,570 | 3,229 | 30,371 | |||||
Operating income (loss) | $ 22 | $ (319) | $ 108 | $ (189) | |||||
Number of: | |||||||||
Kmart Stores | 1,312 | - | - | 1,312 | |||||
Full-Line Stores | - | 894 | 122 | 1,016 | |||||
Specialty Stores | - | 1,340 | 334 | 1,674 | |||||
Total Stores | 1,312 | 2,234 | 456 | 4,002 | |||||
39 Weeks Ended October 31, 2009 | |||||||||
millions, except store data | Kmart | Sears Domestic | Sears Canada | Sears Holdings | |||||
Merchandise sales and services | $ 10,825 | $ 16,780 | $ 3,191 | $ 30,796 | |||||
Cost of sales, buying and occupancy | 8,352 | 11,821 | 2,184 | 22,357 | |||||
Gross margin dollars | 2,473 | 4,959 | 1,007 | 8,439 | |||||
Gross margin rate | 22.8% | 29.6% | 31.6% | 27.4% | |||||
Selling and administrative | 2,489 | 4,616 | 762 | 7,867 | |||||
Selling and administrative expense as a | 23.0% | 27.5% | 23.9% | 25.5% | |||||
Depreciation and amortization | 109 | 495 | 74 | 678 | |||||
Gain on sales of assets | (19) | (6) | (45) | (70) | |||||
Total costs and expenses | 10,931 | 16,926 | 2,975 | 30,832 | |||||
Operating income (loss) | $ (106) | $ (146) | $ 216 | $ (36) | |||||
Number of: | |||||||||
Kmart Stores | 1,343 | - | - | 1,343 | |||||
Full-Line Stores | - | 912 | 122 | 1,034 | |||||
Specialty Stores | - | 1,268 | 269 | 1,537 | |||||
Total Stores | 1,343 | 2,180 | 391 | 3,914 | |||||
Sears Holdings Corporation | |||||||||||
Adjusted EBITDA | |||||||||||
Amounts are Preliminary and Subject to Change | |||||||||||
13 Weeks Ended | |||||||||||
millions | October 30, 2010 | October 31, 2009 | |||||||||
Kmart | Sears Domestic | Sears Canada | Sears Holdings | Kmart | Sears Domestic | Sears Canada | Sears Holdings | ||||
Operating income (loss) per statement of operations | $ (56) | $ (271) | $ 35 | $ (292) | $ (72) | $ (123) | $ 89 | $ (106) | |||
Depreciation and amortization | 37 | 159 | 23 | 219 | 37 | 162 | 25 | 224 | |||
Gain on sales of assets | - | - | - | - | (9) | (2) | - | (11) | |||
Before excluded items | (19) | (112) | 58 | (73) | (44) | 37 | 114 | 107 | |||
Closed store reserve and severance | 4 | - | - | 4 | 5 | 5 | - | 10 | |||
Domestic pension expense | - | 31 | - | 31 | - | 44 | - | 44 | |||
Adjusted EBITDA as defined | $ (15) | $ (81) | $ 58 | $ (38) | $ (39) | $ 86 | $ 114 | $ 161 | |||
% to revenues | -0.4% | -1.6% | 5.0% | -0.4% | -1.1% | 1.6% | 9.4% | 1.6% | |||
39 Weeks Ended | |||||||||||
millions | October 30, 2010 | October 31, 2009 | |||||||||
Kmart | Sears Domestic | Sears Canada | Sears Holdings | Kmart | Sears Domestic | Sears Canada | Sears Holdings | ||||
Operating income (loss) per statement of operations | $ 22 | $ (319) | $ 108 | $ (189) | $ (106) | $ (146) | $ 216 | $ (36) | |||
Depreciation and amortization | 109 | 479 | 73 | 661 | 109 | 495 | 74 | 678 | |||
Gain on sales of assets | (6) | (47) | - | (53) | (19) | (6) | (45) | (70) | |||
Before excluded items | 125 | 113 | 181 | 419 | (16) | 343 | 245 | 572 | |||
Closed store reserve and severance | 8 | 5 | - | 13 | 39 | 41 | 8 | 88 | |||
Domestic pension expense | - | 88 | - | 88 | - | 128 | - | 128 | |||
Adjusted EBITDA as defined | $ 133 | $ 206 | $ 181 | $ 520 | $ 23 | $ 512 | $ 253 | $ 788 | |||
% to revenues | 1.3% | 1.3% | 5.4% | 1.7% | 0.2% | 3.1% | 7.9% | 2.6% | |||
Sears Holdings Corporation | ||||||||||||
Adjusted Earnings per Share | ||||||||||||
Amounts are Preliminary and Subject to Change | ||||||||||||
13 Weeks Ended October 30, 2010 | ||||||||||||
millions, except per share data | GAAP | Domestic Pension Expense | Closed Store Reserve and Severance | Mark-to-Market Losses | Canadian Dividend Tax Impact | As Adjusted | ||||||
Cost of sales, buying and occupancy impact | $ 7,121 | $ - | $ (3) | $ - | $ - | $ 7,118 | ||||||
Selling and administrative impact | 2,630 | (31) | (1) | - | - | 2,598 | ||||||
Operating loss impact | (292) | 31 | 4 | - | - | (257) | ||||||
Other income (loss) impact | - | - | - | (1) | - | (1) | ||||||
Income tax benefit impact | 147 | (12) | (1) | - | 9 | 143 | ||||||
Noncontrolling interest impact | (3) | - | - | - | - | (3) | ||||||
After tax and noncontrolling interest impact | (218) | 19 | 3 | (1) | 9 | (188) | ||||||
Diluted loss per share impact | $ (1.98) | 0.18 | 0.02 | (0.01) | 0.08 | $ (1.71) | ||||||
13 Weeks Ended October 31, 2009 | ||||||||||||
millions, except per share data | GAAP | Domestic Pension Expense | Closed Store Reserve and Severance | Mark-to-Market Gains | As Adjusted | |||||||
Cost of sales, buying and occupancy impact | $ 7,419 | $ - | $ (5) | $ - | $ 7,414 | |||||||
Selling and administrative impact | 2,664 | (44) | (5) | - | 2,615 | |||||||
Operating loss impact | (106) | 44 | 10 | - | (52) | |||||||
Other income (loss) impact | (5) | - | - | (2) | (7) | |||||||
Income tax benefit impact | 66 | (16) | (4) | 1 | 47 | |||||||
Noncontrolling interest impact | (15) | - | - | - | (15) | |||||||
After tax and noncontrolling interest impact | (127) | 28 | 6 | (1) | (94) | |||||||
Diluted loss per share impact | $ (1.09) | $ 0.24 | $ 0.05 | $ (0.01) | $ (0.81) | |||||||
39 Weeks Ended October 30, 2010 | ||||||||||||
millions, except per share data | GAAP | Domestic Pension Expense | Closed Store Reserve and Severance | Mark-to-Market Losses | Gain on Sales of Real Estate | Canadian Dividend Tax Impact | ||||||
Cost of sales, buying and occupancy impact | $ 21,972 | $ - | $ (5) | $ - | $ - | $ - | ||||||
Selling and administrative impact | 7,791 | (88) | (8) | - | - | - | ||||||
Gain on sales of assets impact | (53) | - | - | - | 35 | - | ||||||
Operating loss impact | (189) | 88 | 13 | - | (35) | - | ||||||
Other income (loss) impact | (9) | - | - | 1 | - | - | ||||||
Income tax benefit impact | 151 | (33) | (4) | - | 14 | 9 | ||||||
Noncontrolling interest impact | (9) | - | - | - | - | - | ||||||
After tax and noncontrolling interest impact | (241) | 55 | 9 | 1 | (21) | 9 | ||||||
Diluted loss per share impact | $ (2.15) | $ 0.49 | $ 0.09 | $ 0.01 | $ (0.19) | $ 0.09 | ||||||
39 Weeks Ended October 31, 2009 | ||||||||||||
millions, except per share data | GAAP | Domestic Pension Expense | Closed Store Reserve and Severance | Mark-to-Market Losses | Gain on Sales of Real Estate | As Adjusted | ||||||
Cost of sales, buying and occupancy impact | $ 22,357 | $ - | $ (22) | $ - | $ 22,335 | |||||||
Selling and administrative impact | 7,867 | (128) | (66) | - | 7,673 | |||||||
Gain on sales of assets impact | (70) | - | - | - | 44 | (26) | ||||||
Operating income impact | (36) | 128 | 88 | - | (44) | 136 | ||||||
Other income (loss) impact | (52) | - | - | 34 | - | (18) | ||||||
Income tax benefit impact | 94 | (47) | (32) | (9) | 12 | 18 | ||||||
Noncontrolling interest impact | (31) | - | (2) | (9) | 12 | (30) | ||||||
After tax and noncontrolling interest impact | (195) | 81 | 54 | 16 | (20) | (64) | ||||||
Diluted loss per share impact | $ (1.64) | $ 0.69 | $ 0.46 | $ 0.13 | $ (0.17) | $ (0.53) | ||||||
SOURCE Sears Holdings Corporation
CONTACT: Sears Holdings Public Relations, +1-847-286-8371
Web Site: http://www.searsholdings.com