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Sears Retail Sales Edge Up 1.1%

10/16/2003 09:55:00 AM Eastern

Hoffman Estates, Ill. - Major appliances showed solid improvements in the third quarter, helping the retail segment at Sears to record a 1.1 percent revenue gain, to $7.34 billion, over the $7.26 billion reported in the year-ago period.

Domestic comparable-store sales rose 1.2 percent.

However, the retail and related services segment came in with an operating loss of $85 million, in the third quarter, ended Sept. 27, compared with operating income of $42 million in the same three months in 2002. Included in the three-month results was a $141 million charge related to the closing of three of the chain's The Great Indoors stores and the conversion of a fourth to an outlet store. Gross margin for domestic stores declined 130 basis points, to 26.2 percent, while improvements in sourcing were more than offset by an increase in promotional activities.

For the nine months, retail sales were relatively flat, coming in at $21.76 billion, compared with $21.73 billion in the same period a year ago. Retail reported operating income of $75 million for the nine months, down from $429 million year on year.

The number of full-line Sears stores remained constant, with 869 at the end of September, compared with 872 at the end of the same month in 2002. Five full-line locations were closed in 2003.

Consolidated third quarter total revenue at Sears increased to $9.8 billion, up from $9.7 billion in the year-ago period. However, net income dropped to $147 million in the three months, compared with $189 million year-on-year. Sears' third quarter earnings included a pretax charge of $141 million.

'The third quarter results were in line with our expectations,' said chairman/CEO Alan Lacy. 'We are pleased with our return to sales growth following two years of a fundamental repositioning and restructuring of our core business. While we have much still to do, we believe the business is well positioned for profitable growth.'

For the nine months, total Sears' revenue was flat at $28.87 million, compared with $28.85 million in the same period in 2002. Net income in the nine months improved to $648 million, up from $528 million in the same time frame a year earlier.

Operating income for the retail segment at Sears is expected to increase in the low double-digit range. Comp-store sales for the three months are anticipated to increase in the low single digits, while gross margin will be flat year over year.

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