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Sears Back In The Black

Hoffman Estates,
Ill. – A $235 million cash injection from the sale of select U.S. and Canadian
stores has returned Sears Holdings to profitability for its first fiscal

The company
pre-announced expected net income of between $155 million and $195 million for
the three months, ended April 28, compared with a $165 million net loss during
the year ago period and a $2.4 billion net loss in the fourth quarter.

pre-announced the results in advance of its annual shareholders meeting

Comp-store sales
slipped 1 percent at U.S. Sears stores and 1.6 percent at Kmart stores, dragged
down by declines in majaps at Sears and CE at both chains.

Credit Suisse
retail analyst Gary Balter believes the majap declines reflect an easing of
Sears’ aggressive price promotions, which the company has maintained in recent
years to preserve if not regain market share.

Sears’ Canadian
comps are expected to decline 6.2 percent on weakness in CE, partially offset
by increases in majaps and mattresses.

The company also
said it is proceeding with its announced spin-off of its Sears Hometown and
Outlet Stores, which is expected to generate proceeds of as much as $500

In a research note
Balter called the results “a nice recovery” from the fourth-quarter loss, but
said they still don’t point to the long-term cash flow trends that are
necessary to finance the business without selling additional assets.

The analyst
estimates that Sears will need about $1.4 billion in EBITDA in 2013, assuming
no change in working capital and no asset sales to offset pension, interest,
and capital expenditures. For that reason, he believes that “further
dismemberment of this chain, including spinning off Canada and selling or
spinning Lands’ End remains likely.”