HOFFMAN ESTATES, Ill. -- Sears, Roebuck and Co. (NYSE: S) reported record second-quarter 2000 net income of $388 million, or $1.11 per share, compared with reported 1999 second-quarter net income of $331 million, or $0.86 per share, an increase of 29 percent on a per share basis.

The increase in earnings per share was primarily due to strength in Sears retail and credit businesses coupled with the company's share repurchase program. In retail, robust hardlines sales and improved selling and administrative expenses resulted in operating income growth of 9.8 percent over the second quarter of the prior year. Credit operating income increased by 26.3 percent due to higher revenues, improved portfolio quality, securitization activity, and reductions in selling and administrative expense. Operating income in the company's home services business also improved over 1999.

"We continue to benefit from the strength of our retail and credit businesses, which both contributed to strong growth in operating income and record earnings this quarter," said Chairman and Chief Executive Officer Arthur C. Martinez. "In our retail business, we posted solid sales growth and lower selling and administrative expenses, while our credit business saw further improvement in portfolio quality and lower operating costs. Our strong cash flow allowed us to repurchase over 10 million shares of Sears stock during the quarter and our return on equity over the last twelve months has expanded to 25.1 percent."

SEARS/ADD ONE

For the first six months of 2000, net income was $623 million or $1.76 per share, compared with $477 million or $1.24 per share for the first half of last year, an increase of 42 percent on a per share basis.

Revenues

Revenues for the second quarter of 2000 increased 4.6 percent to $10.08 billion, compared with $9.64 billion for the same period a year ago. The revenue increase was primarily due to improvements in Sears full-line and dealer stores, Sears Canada and credit. Domestic comparable store sales increased 2.7 percent.

"In the second quarter, we continued to see strong momentum in our hardlines business led by appliances and electronics," said Martinez. "In softgoods, footwear, fine jewelry, cosmetics and fragrances showed solid growth but, consistent with difficult industry trends, were offset by apparel results. The Great Indoors and Sears dealer stores also enjoyed strong performance for the quarter."

Revenues in the services segment, which include Sears Home Services and Sears Direct Response businesses, were $732 million in the quarter, roughly flat with a year ago. Sears Canada's revenue increased 9.8 percent, to $1.02 billion in the second quarter of 2000, due to strong comparable store sales growth in its full-line retail stores. Second quarter domestic credit revenues increased 6.2 percent from a year ago, to $1.03 billion. The increase primarily reflects improved yield and higher securitization revenue.

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 26.4 percent in the second quarter of 2000 compared with 27.1 percent in the comparable 1999 period. The change reflects a decrease in retail margins partially offset by improvements in the services margin rate.

SEARS/ADD TWO

Retail gross margin declined in the second quarter primarily due to increased markdown activity and a higher sales mix of hardlines products.

Selling and administrative expense as a percentage of total revenues was 21.0 percent in the second quarter of 2000 compared to 21.4 percent in the prior year period. The improvement reflects selling and administrative expense leverage across all segments, partially offset by increased investment in on-line initiatives and integration costs associated with Sears Canada's acquisition of Eatons.

Provision for uncollectible accounts

In the second quarter of 2000, the consolidated provision for uncollectible accounts was $215 million, flat with the second quarter of 1999. The domestic allowance for doubtful accounts remained at $725 million, consistent with the year-end 1999 and first quarter 2000 levels.

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, www.sears.com. Sears, Roebuck and Co. owns a majority stake in Sears Canada.

SEARS, ROEBUCK AND CO.
CONSOLIDATED INCOME
			For the 13 Weeks Ended						For the 26 Weeks Ended
			July 1, 2000 and July 3, 1999						July 1, 2000 and July 3, 1999
	(millions, except earnings per share)		2000		1999 *		% Change		2000		1999 *		% Change
	Revenues
		Merchandise and services	$ 8,975		$ 8,599		4.4%		$ 16,804		$ 16,127		4.2%
		Credit revenues	1,101		1,037		6.2%		2,245		2,165		3.7%
	Total revenues		10,076		9,636		4.6%		19,049		18,292		4.1%
	Costs and expenses
		Cost of sales, buying and occupancy	6,606		6,271		5.3%		12,475		11,929		4.6%
		Selling and administrative	2,112		2,058		2.6%		4,066		3,977		2.2%
		Depreciation and amortization	210		215		-2.3%		419		424		-1.2%
		Provision for uncollectible accounts	215		215		0.0%		460		506		-9.1%
		Interest	310		313		-1.0%		626		647		-3.2%
	Total costs and expenses		9,453		9,072		4.2%		18,046		17,483		3.2%
	Operating income		623		564		10.5%		1,003		809		24.0%
	Other income, net		5		(12)		-		6		(14)		-
	Income before income taxes and
		minority interest	628		552		13.8%		1,009		795		26.9%
	Income taxes		(232)		(209)		11.0%		(372)		(301)		23.6%
	Minority interest		(8)		(12)		-33.3%		(14)		(17)		-17.6%
	Net income		$ 388		$ 331		17.2%		$ 623		$ 477		30.6%
	Earnings per share:
		Basic	$ 1.12		$ 0.87		28.7%		$ 1.77		$ 1.25		41.6%
		Diluted	$ 1.11		$ 0.86		29.1%		$ 1.76		$ 1.24		41.9%
	Average common and dilutive common
	equivalent shares outstanding		348.4		383.6				354.2		384.4
	*	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.