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Sears Reports $2.4B Net Loss

2/23/2012 09:26:19 AM Eastern

Hoffman Estates, Ill. - Sears Holdings reported a net loss
of $2.4 billion in its fiscal fourth quarter, and revealed the sale of 11 Sears
locations and the spinning off of businesses to raise cash.

Sears said it will raise as much as $770 million through a
rights offering for its Hometown and outlet businesses and select hardware
stores, and through the sale of 11 Sears stores.

Separating the Hometown, outlet and hardware operations is
expected to raise $400 million to $500 million, which will provide additional
liquidity and will likely be used for general corporate purposes, the company
said.

The sale of the full-line Sears stores, to General Growth
Properties, will generate $270 million. The transaction is expected to close in
the next 45 to 60 days, although the stores will continue to operate as Sears
locations into 2013. Final closing dates will be announced later this year.

The sale announcement came on the same day Sears Holdings
announced major net losses for its fiscal fourth quarter and fiscal year.

The $2.4 billion net loss from continuing operations attributable
to Sears Holdings' shareholders for the fourth quarter compares with net income
of $274 million for the prior year's final quarter. The net loss for the year
was $3.1 billion compared with the prior year's $133 million net income.

Total revenues decreased $518 million to $12.5 billion for
the quarter compared with the prior year. Full-year revenues decreased $1.1
billion to $41.6 billion compared with the prior year. The declines in total
revenue were primarily due to lower comp-store sales and the effect of having
fewer Kmart and Sears full-line stores in operation.

Sears Domestic's comp-store sales declined 4.1 percent in
the fourth quarter and 3.0 percent for fiscal 2011 and Kmart's comparable store
sales declined 2.7 percent in the fourth quarter and 1.4 percent for fiscal
2011

For both Sears Domestic and Kmart, fourth-quarter comp sales
declines were driven by consumer electronics and appliances, among other
categories. And lower margins for CE in the quarter and during the year hurt
both units.

Lou D'Ambrosio, Sears Holdings' CEO/president, said, "We are
taking immediate actions to address our fourth-quarter performance including
cost and inventory reductions, honed and targeted marketing, margin actions, and
bringing in new talent to strengthen our merchandising and leadership team,
like Ron Boire, who was recently named chief merchant and president, Sears and
Kmart formats."

D'Ambrosio continued, "It's also important to distinguish
between our earnings issue and the strength of our balance sheet, where we have
significant assets and liquidity. We are further strengthening the balance
sheet by approximately $1 billion through the actions we are announcing today
regarding Hometown, outlet, and hardware stores, a real estate transaction, and
inventory reductions.

As we operationally improve the business, we are also accelerating
our actions to lead in integrated retail. We are combining our massive retail
assets with a set of technology platforms we are building to reshape and deepen
our relationships with Shop Your Way Reward members - at the store, online, and
in the home."

In a
rare open letter posted
on Sears' corporate website, chairman Eddie Lampert called the results an
"anomaly" and emphasized the company's significant liquidity. But he also
acknowledged that "The ability to successfully transform the disparate
businesses we have in the Sears Holdings portfolio under a single management
structure has proven very difficult," and left open the door to further
spinoffs.

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