In advance of its annual meeting of shareholders to be held on May 2, 2012, Sears Holdings Corporation announced its expected first quarter ended April 28. Sears' Domestic operates experienced an 1 percent comparable-store decline. Sears
Domestic achieved double-digit increases in its apparel and footwear categories. These increases were offset by declines in the appliances and consumer
electronics categories.

Kmart's comparable store sales decreased 1.6 percent, reflecting
increases in the apparel and footwear categories, offset by declines in
the consumer electronics category. Combined Sears Domestic and Kmart comps were down 1.3 percent.

Sears Canada expects to report a comparable store sales decline of 6.2 percent
for the quarter. The decline is primarily due to sales decreases in
electronics, home decor, hardware and apparel, partially offset by
increases in major appliances and mattresses.

Net income from continuing operations attributable to Holdings' shareholders for the first quarter of 2012 of between $155 million and $195 million, or $1.46 and $1.84 per diluted share, versus a net loss from continuing operations attributable to Holdings' shareholders of $165 million ($1.53 loss per diluted share from continuing operations), for the first quarter in 2011.  The above range includes approximately $235 million, after tax and minority interest, of gains from the sale of certain U.S. and Canadian stores. These transactions generated $440 million of cash proceeds.

Adjusted EBITDA of $135 million to $195 million for the first quarter of 2012 versus $58 million for fiscal 2011.  The increase in Adjusted EBITDA reflects an improved margin rate, particularly in appliances, and reduced expenses.  

While Sears Domestic experienced an overall sales decrease, Sears achieved double-digit increases in its apparel and footwear categories.  These increases were offset by declines in the appliances and consumer electronics categories. 

Sears currently expects to end the first quarter with approximately $8.9 billion in merchandise inventories (domestic of $8.1 billion and $0.8 billion at Sears Canada) as compared to $9.7 billion of inventory last year.

Adjusted EBITDA

The company expects to report total Adjusted EBITDA of $135 million to $195 million in the first quarter (domestic of $165 million to $195 million and Sears Canada of $(30) million to $0 million), which is computed as follows:

  •     expected net income from continuing operations attributable to Holdings' shareholders of $155 million to $195 million;
  •     plus income statement line items not included in EBITDA consisting of income attributable to noncontrolling interest, loss from discontinued operations, income taxes, other income (loss), interest and investment income, interest expense, depreciation and amortization expense and gains on sales of assets of $(80) million to $(100) million;
  •     plus pension expense and closed store / severance costs of approximately $80 million, which we do not include in Adjusted EBITDA. 

In the first quarter of 2011, Sears reported Adjusted EBITDA of $58 million (domestic of $73 million and Sears Canada of $(15) million).  

Transaction Updates

On April 17, 2012, the company closed the previously announced transaction with General Growth Properties to sell 11 properties (six owned and five leased) for $270 million in net cash proceeds.  In addition, Sears Canada, a consolidated, 95 percent-owned subsidiary of Sears, completed its transaction with The Cadillac Fairview Corporation Limited to surrender and early terminate the leases on three properties for $170 million Canadian in cash proceeds on April 20, 2012.