Sears Holdings Provides Update On Actions To Transform Business And Third Quarter Performance

HOFFMAN ESTATES, Ill., Oct. 29, 2013 /PRNewswire/ -- Today, we ("Sears Holdings Corporation," "Holdings,"  "us," "our," or the "Company") (Nasdaq: SHLD) are announcing a number of actions intended to improve our financial flexibility and accelerate our transformation into a leading Integrated Retailer that fosters relationships with members through ourShop Your Wayplatform. We also are providing an update on our third quarter operating performance.  

First, Sears Canada announced today the sale of five store leases to Cadillac Fairview Corporation Limited for total consideration of $400 million Canadian.  The transaction is expected to close in the next ten business days. With respect to this transaction, Edward S. Lampert, Sears Holdings' Chairman and Chief Executive Officer, said "We are very supportive of Sears Canada's actions to create value.  It is clear that the Canadian market is becoming more competitive, but also more lucrative for those who can compete effectively.  We believe that Sears Canada is well positioned to create value for its shareholders through a combination of operating performance improvements, business portfolio actions and leveraging its real estate footprint working with its mall and other partners." 

Holdings will work with the board and management of Sears Canada with a goal of increasing the value of our 51% interest and realizing significant cash proceeds to support our transformation and to create value for our shareholders. "The current market value of our 51% interest in Sears Canada is over $675 million. We believe that the maximization of value of our stake in Sears Canada will improve our financial position and our ability to execute on our strategic transformation," said Mr. Lampert.

Second, with regard to our domestic operations, we will continue to evaluate our stores in the context of our Integrated Retail strategy. As we have done over the past several years, we will review each location, including leased locations that are set to expire, and decide whether or not to renew such leases. We expect to improve our financial performance by removing unprofitable locations, and redeploying the capital tied up in those locations, while sharpening our focus around existing Sears and Kmart stores that have higher levels of profitability.  We believe this will be accomplished without incurring significant closed store lease liabilities due to the nature of our leases and the approach we are taking to refine our portfolio to position us as a more profitable company that leverages our stores as part of our overarching Integrated Retail vision.

Third, we seek to accelerate our transformation by becoming a more focused company that is easier to understand and to manage not just from the standpoint of our store portfolio but also from the standpoint of our portfolio of businesses. We are evaluating separating both our Lands' End business and Sears Auto Center ("SAC") business.  We believe separating the management of these two businesses from Sears Holdings would allow them to pursue their own strategic opportunities, optimize their capital structures, attract talent, and allocate capital in a more focused manner while bringing our business unit structure to life outside of the Sears Holdings portfolio.

Regarding Lands' End, we believe that Lands' End is an iconic brand with the potential to become a more global brand, and we presently anticipate that any separation, if pursued, would not be structured as a sale but rather through a transaction that would allow existing shareholders the opportunity to benefit from the significant potential for value creation over the long term. 

Regarding Sears Auto Centers, we believe that SAC has a unique national footprint that can be leveraged to create significant value. We have begun the repositioning of the business around non-tire related services as tire margins have been compressed industry-wide over the past several years, leveraging the store footprint, the number of service bays and our auto technicians.  We are in the process of evaluating strategic alternatives for the business to maximize its value for our shareholders.

Finally, Sears Holdings announced an update regarding its operating performance for the third quarter ending November 2, 2013.  Comparable store sales for the twelve-week period ended October 26, 2013 declined 3.7%, with a decline of 4.8% for Sears Domestic stores and 2.6% for Kmart stores. Reflecting the challenging overall economic and highly competitive environment, and higher Shop Your Way ("SYW") Rewards expense similar to our experience in the second quarter ended on August 3, 2013 (as we accelerate our SYW promotional activity to increase engagement with our members), the Company expects third quarter Adjusted EBITDA to be in an approximate range of between negative $250 million to $300 million versus the prior year's quarter Adjusted EBITDA of negative $156 million, which consisted of negative $164 million for SHC Domestic and positive $8 million for Sears Canada.  Despite the increased operating loss, we have managed our inventory levels and capital expenditures more efficiently to mitigate the impact of this loss on our cash flow.  We continue to see improvement in our SYW Rewards member performance metrics, including higher member penetration, higher points redemptions and our more engaged members shopping more frequently.  With respect to our previously announced objectives, as of this update, we have generated approximately $700 million of asset monetization proceeds and are on track to reduce inventory at peak, year over year, by $500 million as well as reduce fixed expenses by $200 million for the full year.  In addition, we successfully completed a $1.0 billion, 5-year term loan.

Adjusted EBITDA was determined as follows:


Q3 2013


Q3 2012

expected net loss attributable to Holdings' shareholders




plus domestic pension settlements and expense not included in Adjusted EBITDA




plus income statement line items not included in EBITDA consisting of noncontrolling interest, income taxes, interest expense, interest and investment income, other income/loss, depreciation expense and gain on sales of assets through October 21, 2013




Adjusted EBITDA








Third Quarter Earnings Release

The company currently plans to release financial results for its fiscal 2013 third quarter on or about November 21, 2013, before the market opens.

Forward-Looking Statements

This press release contains forward-looking statements, including with respect to our transformation through our Integrated Retail strategy, Sears Canada's business and real estate, possible transactions discussed elsewhere in this press release, our expectations for the third quarter of fiscal 2013, and our objectives with respect to the generation of additional liquidity. Forward-looking statements are subject to risks and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: our ability to offer merchandise and services that our customers want, including our proprietary brand products; our ability to successfully implement our Integrated Retail strategy; Sears Canada's ability to complete the announced transaction for the sale of certain of its stores; competitive conditions in the retail and related services industries; worldwide economic conditions and business uncertainty, including the availability of consumer and commercial credit, changes in consumer confidence and spending, the impact of rising fuel prices, and changes in vendor relationships; our ability to complete possible transactions with respect to Lands' End, Sears Auto Centers and/or our interest in Sears Canada on terms that are acceptable to us, on intended timetables or at all and the impact of the evaluation and/or completion of those transactions on our other businesses; the potential impact on our business and our relationships from the announcements contained in this press release; our ability to successfully achieve our plans to generate liquidity, reduce inventory and reduce fixed costs; conditions and possible limits on our access to capital markets and other financing sources; vendors' lack of willingness to provide acceptable payment terms or otherwise restricting financing to purchase inventory or services; the impact of seasonal buying patterns, including seasonal fluctuations due to weather conditions, which are difficult to forecast with certainty; our dependence on sources outside the United States for significant amounts of our merchandise; our extensive reliance on computer systems, including legacy systems, to implement our integrated retail strategy, process transactions, summarize results and manage our business, which may be subject to disruptions or security breaches; our reliance on third parties to provide us with services in connection with the administration of certain aspects of our business and the transfer of significant internal historical knowledge of such parties; impairment charges for goodwill and intangible assets or fixed-asset impairment for long-lived assets; our ability to attract, motivate and retain key executives and other associates; our ability to protect or preserve the image of our brands; the outcome of pending and/or future legal proceedings, including product liability claims and proceedings with respect to which the parties have reached a preliminary settlement; and the timing and amount of required pension plan funding; and other risks, uncertainties and factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available.

About Sears Holdings Corporation

Sears Holdings Corporation (NASDAQ: SHLD) is a leading integrated retailer with almost 2,500 full-line and specialty retail stores in the United States and Canada and the home of Shop Your Way, a social shopping experience where members have the ability to earn points and receive benefits across a wide variety of physical and digital formats through Sears Holdings is the leading home appliance retailer as well as a leader in tools, lawn and garden, fitness equipment and automotive repair and maintenance. Key proprietary brands include Kenmore, Craftsman and DieHard, with a broad apparel offering, including such well-known labels as Lands' End, the Kardashian Kollection, Jaclyn Smith and Joe Boxer, as well as Sofia by Sofia Vergara and The Country Living Home Collection. We are the nation's largest provider of home services, with more than 14 million service and installation calls made annually, and have a long-established commitment to those who serve in the military through initiatives like the Heroes at Home program. We have been named the 2011 Mobile Retailer of the Year, Recipient of the 2013 ENERGY STAR® "Partner of the Year - Sustained Excellence Award" for Product Retailing and Energy Management and was named one of the Top 20 Best Places to Work for Recent Grads. Sears Holdings Corporation operates through its subsidiaries, including Sears, Roebuck and Co. and Kmart Corporation. For more information, visit Sears Holdings' website at Twitter: @searsholdings || Facebook:

Sears Holdings Public Relations
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SOURCE Sears Holdings Corporation

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