SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) OCtober 16, 1996
SEARS, ROEBUCK AND CO.
(Exact name of registrant as specified in charter)
New York
(State or Other
Jurisdiction of
Incorporation)
1-416
(Commission File Number)
36-1750680
(IRS Employer Identification No.)
3333 Beverly Road, Hoffman Estates, Illinois
(Address of principal executive offices)
60179
(Zip Code)
Registrant's telephone number, including area code (847) 286-2500
<PAGE>
Item 5. Other Events.
On October 16, 1996, the registrant issued its thirs quarter earnings press
release attached hereto as Exhibit 99.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The Exhibit Index on page E-1 is incorporated herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEARS, ROEBUCK AND CO.
Date: October 17, 1996 By: /s/ Alan J. Lacy
ALAN J. LACY
Executive Vice President
and Chief Financial Officer
<PAGE>
EXHIBITS
99. Sears, Roebuck and Co. press release dated October 16, 1996.
Exhibit 99
Harry E. Wren
Asst. Treasurer/Director
Investor Relations
Sears, Roebuck and Co.
3333 Beverly Road, BSC B5-336B
Hoffman Estates, Illinois 60179
847-286-1468
Fax 847-286-7829
FOR IMMEDIATE RELEASE
October 16, 1996
SEARS POSTS RECORD 1996 THIRD-QUARTER EARNINGS;
INCOME UP 22.3 PERCENT ON REVENUE INCREASE OF 7.4 PERCENT
HOFFMAN ESTATES, ILL. -- Sears, Roebuck and Co. today reported that
third-quarter 1996 income increased 22.3 percent to a record $279 million, or
$0.68 per common share, from $228 million, or $0.56 per common share, in
third-quarter 1995.
Income from continuing operations for the first nine months of 1996 rose 23.6
percent to $704 million, or $1.71 per common share, from $570 million, or $1.40
per common share, in the same period of 1995.
Revenues in the third quarter of 1996 were $9.07 billion, a 7.4 percent
increase over revenues of $8.44 billion in the third quarter of 1995. For the
first nine months, revenues were $26.19 billion, up 8.6 percent from revenues
of $24.13 billion in the same period last year.
"Customers have responded enthusiastically to our department store renovations,
broader assortments and quality brands, especially in apparel, and are heavily
shopping our off-the-mall stores," said Sears Chairman and Chief Executive
Officer Arthur C. Martinez. "Our excellent revenue growth, improved domestic
gross margins and strong credit business led to record third-quarter earnings."
Strong domestic merchandising operations; credit revenues up 19 percent
Income from domestic operations for the third quarter of 1996 rose 24.3 percent
to $292 million, from $235 million in the third quarter of 1995. Domestic
operations income for the first nine months of 1996 increased 25.7 percent to
$745 million, from $593 million in the same period of 1995. "The outstanding
performance of our department stores during the third quarter and first nine
months is a credit to the hard work of our associates, and shows the progress
we've made in revitalizing our mall-based business," Martinez said.
Third-quarter domestic operations revenues were $8.28 billion, an 8.4 percent
increase over $7.65 billion in the 1995 period. The improvement was driven by
a 19.0 percent increase in credit revenues and a 7.0 percent increase in
domestic merchandising revenues. Nine-month revenues for domestic operations
were $23.93 billion, up 9.5 percent over revenues of $21.84 billion for the
same period in 1995.
The increase in domestic credit revenues reflected higher receivable balances
resulting from strong merchandise sales and the impact of uniform pricing. The
improvement in credit revenues, coupled with reduced funding rates, improved
net interest margin. This gain was partially offset by an increase in the
provision for uncollectible accounts, due to growth in the credit receivables
portfolio as well as increased delinquencies and personal bankruptcies.
Gross margins and expenses improve despite competition
Domestic gross margins as a percent of merchandising sales and services
increased to 26.1 percent in the third quarter of 1996 from 25.6 percent in the
comparable 1995 period. Martinez said that the gross margin rate benefited
from a shift in sales to higher margin apparel merchandise, improved logistics
costs and savings from strategic sourcing initiatives.
Domestic operations selling and administrative expense as a percent of revenues
improved to 20.9 percent in the third quarter from 21.2 percent in the
comparable 1995 period, as a result of strong revenue growth coupled with
continued emphasis on controlling expenses and leveraging the fixed cost base.
"We are pleased with our overall operating performance," Martinez said,
"because it demonstrates that our merchandising and cost containment strategies
are working well in today's competitive retail environment."
Economic and competitive pressures affect international operations
International operations, which consist of merchandising and credit operations
in Canada and Mexico, posted a third-quarter 1996 net loss of $13 million,
compared with a loss of $7 million in third-quarter 1995. In the third
quarter, Sears Canada recorded $17 million (pre-tax, before minority interest)
of expense related to its previously announced restructuring plan, which is
part of it's on-going cost containment program. This charge reduced quarterly
net income by 2 cents per share. When fully implemented, the plan is projected
to generate annual pre-tax savings of $35 to $45 million (before minority
interest).
For the first nine months of 1996, international operations had a loss of $41
million, compared with a loss of $23 million in 1995, as both Canada and Mexico
continue to suffer from weak economic conditions and competitive pressures.
Net income for the first nine months of 1995, which included the discontinued
operations of Allstate Insurance Group and Homart Development Co., was $1.35
billion, or $3.38 per common share. Sears distributed its 80.3 percent
ownership in Allstate on June 30, 1995 to Sears common shareholders through a
tax-free dividend. Sears also completed the divestiture of Homart in December
1995, which did not result in a gain or loss for the Company.
Through its network of more than 800 mall-based department stores and 1,500
off-the-mall stores, Sears provides apparel, home and automotive products and
services for families throughout North America, serving more than 50 million
households.
<PAGE>
SEARS, ROEBUCK AND CO.
CONSOLIDATED INCOME
Three Months Ended
(millions, except per Sept. 28, Sept. 30, Percent
common share data) 1996 1995 * Change
Revenues
Merchandise sales and services $ 7,965 $ 7,491 6.3
Credit revenues 1,102 949 16.2
Total revenues 9,067 8,440 7.4
Costs and expenses
Cost of sales, buying and occupancy 5,903 5,585 5.7
Selling and administrative 1,933 1,809 6.8
Depreciation and amortization 173 143 21.5
Provision for uncollectible accounts 286 187 53.3
Interest 326 342 (4.8)
Total costs and expenses 8,621 8,066 6.9
Operating income 446 374 19.3
Other income 17 9 96.6
Income before income taxes 463 383 21.1
Income taxes 184 155 19.4
Income from continuing operations 279 228 22.3
Income from discontinued operations,
net of income taxes - -
Net income $ 279 $ 228 22.3
Income from continuing operations
consists of:
Domestic operations $ 292 $ 235 24.3
International operations (13) (7)
Income from continuing operations $ 279 $ 228 22.3
Earnings per common share, after
allowing for dividends on preferred shares:
Income from continuing operations $ 0.68 $ 0.56
Discontinued operations - -
Net income $ 0.68 $ 0.56
Average common and common
equivalent shares outstanding 398.4 396.0
* Certain reclassifications have been made to 1995 balances to conform with
current year presentation.
Nine Months Ended
(millions, except per Sept. 28, Sept. 30, Percent
common share data) 1996 1995 * Change
Revenues
Merchandise sales and services $ 22,929 $ 21,330 7.5
Credit revenues 3,265 2,799 16.6
Total revenues 26,194 24,129 8.6
Costs and expenses
Cost of sales, buying and occupancy 17,098 15,987 6.9
Selling and administrative 5,659 5,249 7.8
Depreciation and amortization 502 420 19.9
Provision for uncollectible accounts 794 521 52.4
Interest 1,013 1,024 (1.1)
Total costs and expenses 25,066 23,201 8.0
Operating income 1,128 928 21.6
Other income 44 20 -
Income before income taxes 1,172 948 23.6
Income taxes 468 378 23.8
Income from continuing operations 704 570 23.6
Income from discontinued operations,
net of income taxes - 776 -
Net income $ 704 $ 1,346 (47.7)
Income from continuing operations
consists of:
Domestic operations $ 745 $ 593 25.7
International operations (41) (23) -
Income from continuing operations $ 704 $ 570 23.6
Earnings per common share, after
allowing for dividends on preferred shares:
Income from continuing operations $ 1.71 $ 1.40
Discontinued operations - 1.98
Net income $ 1.71 $ 3.38
Average common and common
equivalent shares outstanding 399.3 392.8
* Certain reclassifications have been made to 1995 balances to conform with
current year presentation.<PAGE>
SEARS, ROEBUCK AND CO.
SUPPLEMENTARY DOMESTIC OPERATIONS INFORMATION
Three Months Ended
Sept. 28, Sept. 30,
(millions, except number of stores) 1996 1995 *
Revenues
Domestic merchandising sales
and services $ 7,258 $ 6,783
Domestic credit revenues 1,026 863
Total revenues 8,284 7,646
Costs and Expenses
Cost of sales, buying and occupancy 5,363 5,045
Selling and administrative 1,731 1,617
Depreciation and amortization 155 126
Provision for uncollectible accounts 272 172
Interest 285 295
Total costs and expenses 7,806 7,255
Operating income - Domestic operations $ 478 $ 391
Comparable store sales increase 3.8% 5.4%
Gross margin ratio 26.1% 25.6%
Selling and administrative expense ratio 20.9% 21.2%
Nine Months Ended
Sept. 28, Sept. 30,
(millions, except number of stores) 1996 1995 *
Revenues
Domestic merchandising sales
and services $ 20,905 $ 19,310
Domestic credit revenues 3,021 2,531
Total revenues 23,926 21,841
Costs and Expenses
Cost of sales, buying and occupancy 15,529 14,431
Selling and administrative 5,103 4,708
Depreciation and amortization 451 371
Provision for uncollectible accounts 753 487
Interest 880 880
Total costs and expenses 22,716 20,877
Operating income - Domestic operations $ 1,210 $ 964
Comparable store sales increase 5.9% 4.3%
Gross margin ratio 25.7% 25.3%
Selling and administrative expense ratio 21.3% 21.6%
Pretax LIFO charge $ 36 $ 24
Domestic inventories - FIFO $ 5,573 $ 5,089
- LIFO $ 4,825 $ 4,372
Three Months Ended
Sept. 28, Sept. 30,
Domestic credit revenues: 1996 1995 *
Gross finance charges and other revenues $ 1,115 $ 942
Funding cost on securitized receivables (89) (79)
Total $ 1,026 $ 863
Nine Months Ended
Sept. 28, Sept. 30,
Domestic credit revenues: 1996 1995*
Gross finance charges and other revenues $ 3,272 $ 2,778
Funding cost on securitized receivables (251) (247)
Total $ 3,021 $ 2,531
Balances At
Sept. 28, Sept. 30,
Domestic credit receivables: 1996 1995*
Gross credit card receivables $ 24,637 $ 21,902
Receivable balances sold (5,323) (4,404)
Owned credit card receivables $ 19,314 $ 17,498
Domestic merchandising stores: Mall Stores
Large Sized All Other Total
December 30, 1995 425 381 806
Opened 12 - 12
Closed (1) (5) (6)
Sept. 28, 1996 436 376 812
Off-the-Mall Gross
Stores Square Feet
December 30, 1995 1,500 133.5
Opened 216 7.0
Closed (63) (1.4)
Sept. 28, 1996 1,653 139.1
* Certain reclassifications have been made to 1995 balances to conform with
current year presentation.
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