Sears, Roebuck and Co. reported net income, excluding noncomparable items of $1.6 billion, or $4.92 per share for 2002 as compared to $4.22 in 2001, a 17 percent per share increase. On a reported basis, net income was $1.4 billion or $4.29 per share for 2002 as compared to $2.24 last year.
“2002 was a year of tremendous change for Sears,” said Chairman and Chief Executive Officer Alan J. Lacy. “We made significant progress in repositioning and restructuring our core retail business, full-line stores, resulting in improved earnings for Sears. 2002 was a record year for Sears in terms of earnings per share.”
The company also reported fourth quarter 2002 net income, excluding non- comparable items, of $669 million, or $2.11 per share compared to $657 million, or $2.02 per share in 2001, a 4.5 percent per share increase. The increase is due to improved profitability in the company’s Retail and Related Services segment as well as a decrease in the number of shares outstanding, partially offset by a decline in the Credit and Financial Products segment.
“Despite a challenging retail environment and soft sales, we made strong progress in improving our core retail operations,” said Lacy. “The acquisition of Lands End, continued improvement in merchandise assortments, inventory management and vendor sourcing, and an improvement in the cost structure of the full-line stores all contributed to increased profitability.”
Fourth quarter of 2002 was affected by one non-comparable item – the gain on the sale of the company’s remaining investment in Advance Auto Parts, Inc. The sale resulted in an after-tax gain of $179 million, or $0.56 per share and generated after-tax cash proceeds of $335 million. Non-comparable items affecting the fourth quarter of 2001 consisted of charges relating to implementation of productivity initiatives, product category exits, and the Exide battery litigation settlement. These non-comparable items, on an after- tax basis, were $163 million, or $0.50 per share.
Reported fourth quarter 2002 net income, including the non-comparable items, was $848 million or $2.67 per share, compared with $494 million, or $1.52 per share in the fourth quarter of 2001.
Retail and Related Services segment operating income for the fourth quarter, excluding non-comparable items, increased 9.7 percent to $726 million due to improvements in margin, as well as the addition of Lands End. “We are pleased by our strong profit performance in retail in the fourth quarter especially in light of the challenging retail environment during the holiday selling season,” said Lacy.
Retail and Related Services revenues for the fourth quarter of 2002 of $9.7 billion were 2.8 percent above last year’s fourth quarter revenues of $9.5 billion. Increased revenues due to the acquisition of Lands End, and the addition of seven new The Great Indoors stores were partially offset by declines in full-line stores revenues. In hardlines, revenue declined in big- ticket categories such as home appliances, home electronics and lawn and garden. Softline sales declined compared to the prior year, however, sales improved over the prior quarter’s performance.
Retail and Related Services gross margin rate improved by 140 basis points to 29.4 percent. The improvement in margin was due to the inclusion of Lands End and improved inventory management and product sourcing in full-line stores.
Selling and administrative spending was 7.5 percent higher than fourth quarter 2001. The increase was due to additional expense related to the inclusion of Lands End and higher investment in The Great Indoors, partially offset by a reduction in operating costs for full-line stores. Selling and administrative expenses were 19.9 percent of sales compared with 19.0 percent last year.
The company’s preliminary outlook for 2003 is for comparable earnings per share to increase in the low- to mid- single digits. The Retail and Related Services business is expected to grow operating income in the mid-teens, while operating income for the Credit and Financial Products segment is expected to decline at a low- to mid-single-digit rate. Sears Canada is anticipated to post increased year- over-year profitability, and the Corporate and Other segment is expected to remain relatively flat with productivity savings being offset by higher benefit and insurance costs.
SEARS, ROEBUCK AND CO.
CONSOLIDATED INCOME
For the 13 Weeks Ended For the 52 Weeks Ended
December 28, 2002 December 28, 2002
and December 29, 2001 and December 29, 2001
(millions, except earnings per
common share) 2002 2001 2002 2001
REVENUES
Merchandise sales
and services $11,059 $10,819 $35,698 $35,755
Credit and financial products
revenues 1,459 1,401 5,668 5,235
Total revenues 12,518 12,220 41,366 40,990
COSTS AND EXPENSES
Cost of sales, buying and
occupancy 7,744 7,781 25,646 26,234
Selling and administrative 2,612 2,408 9,249 8,892
Provision for uncollectible
accounts 576 415 2,261 1,344
Provision for previously
securitized receivables - - - 522
Depreciation and amortization 225 214 875 863
Interest 277 321 1,143 1,415
Special charges and
impairments - 255 111 542
Total costs and
expenses 11,434 11,394 39,285 39,812
Operating income 1,084 826 2,081 1,178
Other income, net 274 15 372 45
Income before income taxes and
minority interest 1,358 841 2,453 1,223
Income taxes (476) (331) (858) (467)
Minority interest (34) (16) (11) (21)
Income before cumulative effect
of accounting change 848 494 1,584 735
Cumulative effect of change in
accounting for goodwill - - (208) -
NET INCOME $848 $494 $1,376 $735
