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SCVNews.com | Sears Stock Jumps on Word of Expected Profit | 05-01-2012
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Shares of Sears Holding Corp. jumped more than 15 percent Tuesday afternoon on word that the retailer will be telling its stockholders Wednesday that they’ll see a profit of an estimated $1.46 to $1.84 per share on continuing operations for the first quarter of 2012 ($155 million to $195 million), as compared to a loss of $1.53 per share ($165 million) a year earlier.

Sears, which owns Kmart, released the following information Tuesday:

While Sears Domestic experienced an overall sales decrease, Sears achieved double-digit increases in its apparel and footwear categories.  These increases were offset by a high single-digit decline in the appliances and double-digit decline in the consumer electronics categories.  Kmart’s comparable store sales decrease reflects increases in the apparel and footwear categories, offset by declines in the consumer electronics category.

Sears Canada expects to report a comparable store sales decline of 6.2% for the quarter. The decline is primarily due to sales decreases in electronics, home décor, hardware and apparel, partially offset by increases in major appliances and mattresses.

We currently expect to end the first quarter with approximately $8.9 billion in merchandise inventories (domestic of $8.1 billion and $0.8 billion at Sears Canada) as compared to $9.7 billion of inventory last year.

 

Adjusted EBITDA

The Company expects to report total Adjusted EBITDA of $135 million to $195 million in the first quarter (domestic of $165 million to $195 million and Sears Canada of $(30) million to $0 million), which is computed as follows:

* expected net income from continuing operations attributable to Holdings’ shareholders of $155 million to $195 million;

* plus income statement line items not included in EBITDA consisting of income attributable to noncontrolling interest, loss from discontinued operations, income taxes, other income (loss), interest and investment income, interest expense, depreciation and amortization expense and gains on sales of assets of $(80) million to $(100) million;

* plus pension expense and closed store / severance costs of approximately $80 million, which we do not include in Adjusted EBITDA.

In the first quarter of 2011, we reported Adjusted EBITDA of $58 million (domestic of $73 million and Sears Canada of $(15) million).   For further discussion of the reconciling items, see the Company’s press release on fourth quarter and full year 2011 results issued on February 21, 2012.

 

Transaction Updates

On April 17, 2012, the company closed the previously announced transaction with General Growth Properties to sell 11 properties (six owned and five leased) for $270 million in net cash proceeds.  In addition, Sears Canada, a consolidated, 95%-owned subsidiary of Sears, completed its transaction with The Cadillac Fairview Corporation Limited to surrender and early terminate the leases on three properties for $170 million Canadian in cash proceeds on April 20, 2012.

The Company issued a press release on April 30, 2012 related to our previously announced plan to separate its Sears Hometown and Hardware and Sears Outlet businesses.

 

Share Repurchase Activity

During the first quarter of 2012, we had no share repurchase activity.  At April 28, 2012, we had $504 million of remaining authorization under our common share repurchase program.

We expect to release first quarter results on or about May 17, 2012.

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