ÐÓ°ÉÂÛ̳

Sears Reports Third Quarter 2000 Earnings

17 Percent Earnings Per Share Increase on Strength of Credit Business

Sears, Roebuck and Co. (NYSE: S) reported third-quarter 2000 net income of $278 million, or $0.81 per share, compared with reported 1999 third-quarter net income of $236 million, or $0.62 per share, an increase of 31 percent on a per share basis. Third- quarter 1999 earnings included a non-comparable charge of $29 million, or $0.07 per share, related to a charge for staff reductions and the exit of certain automotive retail markets. Excluding the prior period non-comparable items, third quarter 2000 earnings per share of $0.81 is 17 percent higher than 1999 third quarter earnings per share of $0.69.

The increase in earnings per share was primarily due to the continuing strength of the credit business coupled with the company's share repurchase program. Credit operating income increased by 21.8 percent primarily due to substantial reductions in selling and administrative expense. Excluding 1999 non-comparable items, retail operating income increased by 2.3 percent as solid sales gains and continued selling and administrative expense leverage were offset by gross margin pressures in softlines. Improved credit and retail earnings were partially offset by higher corporate expenses and lower operating income in the international and services segments. The company repurchased 6.4 million shares during the quarter.

"Our credit business contributed very strong growth in operating income," said President and Chief Executive Officer Alan J. Lacy. "We are pleased with the quality of our credit portfolio and our on-going productivity improvements. Retail results reflect strong sales performance across several important businesses and investments in new retail growth initiatives such as The Great Indoors."

For the first nine months of 2000, net income was $901 million or $2.57 per share, compared with $713 million or $1.86 per share for the prior year period, an increase of 38 percent on a per share basis. The year-ago period included a non-comparable charge of $29 million, or $0.07 per share. Excluding this non-comparable item, earnings per share increased 33 percent on a per share basis over the prior year period.

Revenues

Revenues for the third quarter of 2000 increased 4.7 percent to $9.63 billion, compared with $9.20 billion for the same period a year ago. The revenue increase was primarily due to improvements in Sears full-line stores and Sears Canada. Domestic comparable store sales increased 3.5 percent.

"In the third quarter, sales increases in appliances, electronics, lawn and garden, and sporting goods were strong," said Lacy. "In softgoods, footwear, fine jewelry, and cosmetics and fragrances also delivered strong growth but, consistent with difficult industry trends, were offset by soft apparel results. Sears Tire Group, dealer stores and The Great Indoors also posted strong sales performance for the quarter."

Sears Canada's revenue increased 6.9 percent, to $1.02 billion in the third quarter of 2000, due to new store openings and solid comparable store sales growth in its full-line retail stores. Third quarter domestic credit revenues increased 1.4 percent from a year ago, to $999 million. Revenues in the services segment, which include Sears Home Services and Sears Direct Response businesses, were $710 million in the quarter, roughly flat with a year ago.

All revenue amounts reflect the application of SEC Staff Accounting Bulletin 101 (SAB 101), which affected the classification of revenue and related costs of licensed businesses. There was no effect on operating income related to the implementation of SAB 101.

Gross margin and selling and administrative costs

Consolidated gross margin as a percent of merchandise sales and services was 25.6 percent in the third quarter of 2000 compared with 26.5 percent in the comparable 1999 period. Both domestic and international margins declined. The decline in domestic retail margins is due to an increase in apparel markdown activity and a higher mix of hardlines products.

Selling and administrative expense as a percentage of total revenues was 21.9 percent in the third quarter of 2000 compared to 22.5 percent in the prior year period. The improvement reflects selling and administrative expense leverage in the credit and retail segments, partially offset by Sears Canada's integration expenses for Eatons and higher corporate expenses.

Provision for uncollectible accounts

In the third quarter of 2000, the consolidated provision for uncollectible accounts was $200 million, a 5 percent increase from $190 million in the third quarter of 1999. The domestic allowance for uncollectible accounts decreased to $624 million from $725 million at year-end 1999 and the first two quarters of 2000. The decrease in the allowance is primarily due to the transfer of $2.4 billion of receivables to the securitization Master Trust. The transferred receivables and the related allowance for uncollectible accounts have been reclassified on the balance sheet to retained interest in transferred credit card receivables.

Sears, Roebuck and Co. is a leading retailer of apparel, home and automotive products and services, with annual revenue of nearly $40 billion. The company serves families across the United States through approximately 860 full-line department stores, more than 2,100 specialized retail locations, and a variety of online offerings accessible through the company's Web site, . Sears, Roebuck and Co. owns a majority stake in Sears Canada.

  SEARS, ROEBUCK AND CO.
  CONSOLIDATED INCOME

  (millions, except    For the 13 Weeks Ended    For the 39 Weeks Ended
  earnings per            Sept. 30, 2000              Sept. 30, 2000
  share)                  & Oct. 2, 1999             & Oct. 2, 1999
                     2000       1999*  % Change  2000      1999*  % Change

  Revenues
    Merchandise and
     services      $ 8,561    $ 8,150    5.0% $ 25,365  $ 24,277     4.5%
    Credit revenues  1,066      1,048    1.7%    3,311     3,213     3.1%
      Total revenues 9,627      9,198    4.7%   28,676    27,490     4.3%

  Costs and expenses
    Cost of sales,
     buying and
     occupancy       6,369      5,993    6.3%   18,844    17,922     5.1%
    Selling and
     administrative  2,105      2,073    1.5%    6,171     6,050     2.0%
    Depreciation and
     amortization      205        205    0.0%      624       629    -0.8%
    Provision for
     uncollectible
     accounts          200        190    5.3%      660       696    -5.2%
    Interest           305        308   -1.0%      931       955    -2.5%
    Restructuring
     charge              0         46 -100.0%        0        46  -100.0%
      Total costs
       and expenses  9,184      8,815    4.2%   27,230    26,298     3.5%

  Operating income     443        383   15.7%    1,446     1,192    21.3%
  Other income, net      1         15       -        7         1        -

  Income before income
   taxes and minority
   interest            444        398   11.6%    1,453     1,193    21.8%

  Income taxes        (159)      (151)   5.3%     (531)     (452)   17.5%

  Minority interest     (7)       (11) -36.4%      (21)      (28)  -25.0%

  Net income         $ 278      $ 236   17.8%    $ 901     $ 713    26.4%


  Earnings per share:

  Basic             $ 0.82     $ 0.62   32.3%   $ 2.58    $ 1.87    38.0%
  Diluted           $ 0.81     $ 0.62   30.6%   $ 2.57    $ 1.86    38.2%

  Average common and
   dilutive common
   equivalent shares
   outstanding       341.8      381.5            350.1     383.4


  * 1999 amounts restated to reflect licensed business operations under SEC
    Staff Accounting Bulletin No. 101 (SAB 101).  The restatement
    reclassified amounts within the statement of income but did not affect
    operating income or net income.


  SEARS, ROEBUCK AND CO.
  CONSOLIDATED BALANCE SHEET

  (millions)
                                       September 30, October 2,  January 1,
                                            2000       1999        2000
  Assets
   Current Assets
    Cash and cash equivalents              $ 497      $ 281       $ 729
    Retained interest in transferred
     credit card receivables               3,741      3,153       3,144
    Credit card receivables, net          15,899     16,879      18,033
    Other receivables                        406        356         404
    Merchandise inventories                6,323      5,556       5,069
    Prepaid expenses and deferred charges    613        609         579
    Deferred income taxes                    651        600         709
     Total current assets                 28,130     27,434      28,667

  Property and equipment, net              6,391      6,415       6,450
  Deferred income taxes                      352        517         367
  Other assets                             1,477      1,510       1,470
     Total assets                       $ 36,350   $ 35,876    $ 36,954

  Liabilities
   Current liabilities
    Short-term borrowings                $ 4,238    $ 3,393     $ 2,989
    Current portion of long-term debt
     and capitalized leases                2,490      1,393       2,165
    Accounts payable and
     other liabilities                     6,736      6,443       6,992
    Unearned revenues                      1,049        940         971
    Other taxes                              436        452         584
     Total current liabilities            14,949     12,621      13,701

  Long-term debt and capitalized leases   11,523     13,245      12,884
  Postretirement benefits                  2,017      2,216       2,180
  Minority interest and
   other liabilities                       1,420      1,465       1,350
     Total liabilities                    29,909     29,547      30,115

  Commitments and Contingent Liabilities

  Shareholders' Equity
   Common shares                             323        323         323
   Capital in excess of par value          3,540      3,563       3,554
   Retained income                         6,613      5,297       5,952
   Treasury stock - at cost               (3,620)    (2,316)     (2,569)
   Deferred ESOP expense                    (105)      (154)       (134)
   Accumulated other comprehensive income   (310)      (384)       (287)
     Total shareholders' equity            6,441      6,329       6,839

     Total liabilities and shareholders'
      equity                            $ 36,350   $ 35,876    $ 36,954

     Total common shares outstanding       336.7      377.7       369.1


  SEARS, ROEBUCK AND CO.
  SUPPLEMENTAL INFORMATION

  (millions, except number of stores)

                      For the 13 Weeks Ended     For the 39 Weeks Ended
                          Sept. 30, 2000            Sept. 30, 2000
                           & Oct. 2, 1999           & Oct. 2, 1999
                      2000      1999   %Change   2000      1999    %Change
  Total Revenues:
  Retail           $ 6,898    $ 6,550    5.3% $ 20,501  $ 19,681     4.2%
  Services             710        709    0.1%    2,065     2,092    -1.3%
  Credit               999        985    1.4%    3,103     3,021     2.7%
  International      1,020        954    6.9%    3,007     2,696    11.5%
   Total revenues  $ 9,627    $ 9,198    4.7% $ 28,676  $ 27,490     4.3%

  Operating income as
   reported:
  Retail              $ 44       $ 18  144.4%    $ 237     $ 122    94.3%
  Services              80         87   -8.0%      244       256    -4.7%
  Credit               385        316   21.8%    1,165       926    25.8%
  Corporate            (87)       (77)  13.0%     (269)     (213)   26.3%
  International         21         39  -46.2%       69       101   -31.7%
   Total operating
    income           $ 443      $ 383   15.7%  $ 1,446   $ 1,192    21.3%

  Operating income
   excluding
   noncomparable items:
  Retail              $ 44       $ 43    2.3%    $ 237     $ 147    61.2%
  Services              80         87   -8.0%      244       256    -4.7%
  Credit               385        316   21.8%    1,165       926    25.8%
  Corporate            (87)       (56)  55.4%     (269)     (192)   40.1%
  International         21         39  -46.2%       69       101   -31.7%
   Total operating
    income           $ 443      $ 429    3.3%  $ 1,446   $ 1,238    16.8%

                    Sept. 30,   Oct. 2,
                      2000      1999
  Domestic
   inventories
    -LIFO          $ 5,604    $ 4,940
    -FIFO          $ 6,230    $ 5,639


                    For the 13 Weeks Ended     For the 39 Weeks Ended
                       Sept. 30, 2000             Sept. 30, 2000
                        & Oct. 2, 1999            & Oct. 2, 1999

  Pretax LIFO charge   $ 6        $ 6             $ 30      $ 30



                                  Jan. 1,                         Sept. 30,
  Domestic retail stores:           2000      Opened     Closed     2000

  Full-line stores                   858         9         (5)        862
  Specialty formats                2,153        74        (47)      2,180
    Total                          3,011        83        (52)      3,042

  Gross square feet                146.4       1.8       (1.0)      147.2

  SEARS, ROEBUCK AND CO.
  SUPPLEMENTAL INFORMATION - CREDIT SEGMENT
  (millions)

  The following credit information relates to the domestic managed portfolio
  of credit card receivables which is comprised of on-book credit card
  receivables, credit card receivables underlying retained interest
  securities and securities which have been sold to third parties.  The
  effective financing rate is based on both domestic on-book debt of the
  company and securitization interest of the Sears Master Trust.


                           For the 13 Weeks ended    For the 39 Weeks Ended
                                Sept. 30, 2000           Sept. 30, 2000
                                & Oct. 2, 1999           & Oct. 2, 1999
                                2000        1999        2000        1999
  Average domestic credit card
   receivables:
   Managed credit card
    receivables              $ 25,453    $ 25,992    $ 25,655    $ 26,707
   Securitized balances sold   (6,840)     (6,313)     (6,540)     (6,458)
   Retained interest in
    transferred credit card
    receivables                (3,673)     (3,553)     (3,293)     (3,882)
   Owned credit card
    receivables              $ 14,940    $ 16,126    $ 15,822    $ 16,367


                              Sept. 30,   Oct. 2,
                                2000        1999
  Ending domestic credit card
   receivables:
   Managed credit card
    receivables              $ 25,726    $ 25,810
   Securitized balances sold   (7,054)     (6,499)
   Retained interest in
    transferred credit card
    receivables                (3,741)     (3,153)
   Other receivables               49          50
   Owned credit card
    receivables              $ 14,980    $ 16,208


                             For the 13 Weeks ended  For the 39 Weeks Ended
                                 Sept. 30, 2000          Sept. 30, 2000
                                & Oct. 2, 1999           & Oct. 2, 1999
                                2000        1999        2000        1999
  Domestic managed credit card
   receivables-
  Net interest margin:
  Portfolio yield              19.70%      19.32%      19.86%      19.50%
  Effective financing rate      5.97%       5.80%       5.92%       5.75%
  Net interest margin          13.73%      13.52%      13.94%      13.75%
  Domestic managed net
   charge-off rate (a)          4.97%       6.39%       5.24%       6.85%


                                      2000                      1999
                         Sep. 30,    July 1,    Apr. 1,   Jan. 1,  Oct. 2,
                           2000        2000       2000      2000      1999
  Domestic managed credit
   card receivables-
  Delinquency rate         7.47%      7.15%      7.20%     7.58%     7.57%
  Allowance for
   uncollectible accounts  $ 624      $ 725      $ 725     $ 725     $ 773
  Allowance % of domestic
   owned credit card
   receivables             4.18%      4.46%      4.48%     4.26%     4.78%


  (a) The 1999 domestic managed net charge-off rate includes all of the
      accounts in the domestic portfolio.  Twelve percent of the accounts
      were converted to the new Total Systems Services, Inc. ("TSYS")
      account processing system in October 1998, 38% were converted in March
      1999, and 50% were converted in April 1999.  Balances are generally
      charged-off earlier under the TSYS system than under the proprietary
      system.  For a description of the anticipated effects of the TSYS
      conversion, see Sears quarterly report on Form 10-Q dated May 14,
      1998.

SOURCE: Sears, Roebuck & Co.

Contact: Peggy A. Palter of Sears, Roebuck & Co., 847-286-8361

Website:








© ÐÓ°ÉÂÛ̳