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) January 23, 1997
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 January 23, 1997, the registrant issued its third 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: January 28, 1997 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 January 23, 1997.
E-1
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
January 23, 1997
SEARS 1996 INCOME JUMPS 24.6 PERCENT IN FOURTH QUARTER
AND 24.0 PERCENT FOR YEAR ON STRONG REVENUE GROWTH
AND IMPROVED MARGINS
HOFFMAN ESTATES, ILL. -- Sears, Roebuck and Co. today reported that
fourth-quarter 1996 income surged 24.6 percent to $567 million, or
$1.42 per common share, from $455 million, or $1.13 per common
share, in fourth-quarter 1995.
The strong double-digit income growth was achieved on a 10.8
percent increase in fourth-quarter 1996 revenues, which rose
to $12.04 billion from $10.87 billion in fourth-quarter 1995.
"We ended the year with excellent fourth-quarter results, which are
even more impressive given the strength of last year's fourth
quarter," said Chairman and Chief Executive Officer Arthur C. Martinez.
"December sales were strong across the board, and included our first ever
back-to-back billion dollar sales weeks. Our full-line stores achieved
double-digit comparable store sales increases in all apparel and softline
categories as well as in computers, electronics, tools and hardware. We
also had double-digit increases in our off-the-mall hardware and dealer
stores. In addition to excellent sales performance, substantial improvement
in domestic gross margins contributed positively to quarterly results."
Sears 1996 net income rose 24.0 percent to a record $1.27 billion, or $3.12
per common share, from income from continuing operations of $1.03 billion,
or $2.53 per common share, for 1995. Annual revenues rose 9.3 percent to
$38.24 billion from $35.00 billion in 1995.
Domestic operations strong; comparable store sales rise 5.4 percent
- --------------------------------------------------------------------
Fourth-quarter 1996 income from domestic operations rose 14.8 percent to $531
million from $463 million in the fourth quarter of 1995.
Revenues from domestic operations in the fourth quarter increased 11.6
percent to $10.92 billion from $9.79 billion in the 1995 period. The
improvement was driven by an 11.0 percent increase in domestic
merchandising revenues and a 17.2 percent increase in credit revenues.
Comparable store sales rose 5.4 percent for the quarter.
Income from domestic operations for 1996 rose 20.9 percent to $1.28 billion,
compared with $1.06 billion in 1995. Revenues for domestic operations
increased 10.2 percent to $34.85 billion from $31.63 billion in 1995.
"We think we have reconnected with our customer in some very powerful ways,"
Martinez said. "Our assortments are right, we are priced right relative to
our competition and, thanks to the efforts of all our associates, our
service levels and in-stock have never been higher."
Gross margins rise as a percent of sales and services
- -----------------------------------------------------
Domestic gross margins as a percent of merchandising sales and services in
fourth-quarter 1996 increased to 27.9 percent from 26.9 percent in the
comparable 1995 period. Consistent with the third-quarter trend, the gross
margin rate continued to benefit from a shift in the balance of sale to
higher-margin apparel merchandise, improved logistics costs and savings
realized from merchandise sourcing initiatives.
"In today's highly competitive retail environment, we are pleased with our
continued margin rate improvement because it demonstrates that our
merchandising and cost-containment strategies are working," Martinez said.
Domestic operations selling and administrative expense as a percentage of
revenues remained flat at 19.5 percent in the fourth quarter. Continued
emphasis on cost control offset increased start-up costs for new store
locations and formats and a prior-year $11 million net benefit from
restructuring activities.
Credit performance strong despite increased charge-offs
- -------------------------------------------------------
Sears domestic credit portfolio, which consists primarily of Sears Card
customer receivables, continued to perform well in 1996. Credit revenues
increased by 17.2 percent in the fourth quarter due to higher receivable
balances driven by strong merchandise sales and the impact of uniform
pricing. The increase in credit revenues, coupled with reduced funding rates,
improved the fourth-quarter net interest margin by $160 million.
Sears provision for uncollectible accounts increased $133 million to $328
million in the fourth quarter, largely due to a 56.9 percent increase in
account charge-offs. The charge-offs reflect continuing growth in the credit
receivable portfolio as well as the industry-wide increase in personal
bankruptcies and delinquencies.
"Credit continued its strong performance despite increased uncollectibles,"
said Martinez. He added that the company "has a number of initiatives
already in place to improve collection efforts, including increased staffing
and investments in technology."
International operations improve
- --------------------------------
International operations, which consist of merchandising and credit
operations in Canada and Mexico, posted fourth-quarter 1996 profits of $36
million, compared with a loss of $7 million in 1995. The increase in
earnings is largely attributable to improved performance at both Sears Canada
and Sears Mexico, a reduction in selling and administrative expenses at Sears
Mexico, and the fact that the prior year's quarterly results were unfavorably
affected by a write-down of certain Sears Canada properties.
For the year, international operations had a loss of $5 million, compared
with a loss of $30 million in 1995. This represents strong improvement over
last year, considering that restructuring costs incurred by Sears Canada in
1996 reduced Sears income by $10 million.
Through its network of more than 800 full-line stores and 2,500 off-the-mall
stores, Sears provides apparel, home and automotive products and services for
families throughout North America, serving more than 50 million households.
SEARS, ROEBUCK AND CO.
CONSOLIDATED INCOME
Three Months Ended
(millions, except per Dec. 28, Dec. 30, Percent
common share data) 1996 1995 * Change
Revenues
Merchandise sales and services $ 10,883 $ 9,858 10.4
Credit revenues 1,159 1,008 15.0
Total revenues 12,042 10,866 10.8
Costs and expenses
Cost of sales, buying and occupancy 7,827 7,215 8.5
Selling and administrative 2,371 2,142 10.7
Depreciation and amortization 195 160 20.9
Provision for uncollectible accounts 342 223 53.8
Interest 352 349 1.3
Total costs and expenses 11,087 10,089 9.9
Operating income 955 777 22.8
Other income (loss) (22) 3 -
Income before income taxes 933 780 19.5
Income taxes 366 325 12.5
Income from continuing operations 567 455 24.6
Income from discontinued operations,
net of income taxes (1) - - -
Net income $ 567 $ 455 24.6
Income from continuing operations
consists of:
Domestic operations $ 531 $ 462 14.8
International operations 36 (7) -
Income from continuing operations $ 567 $ 455 24.6
Earnings per common share, after
allowing for dividends on preferred shares:
Income from continuing operations $ 1.42 $ 1.13
Discontinued operations (1) - -
Net income $ 1.42 $ 1.13
Average common and common
equivalent shares outstanding 398.4 397.5
* Certain reclassifications have been made to 1995 balances to conform
with current year presentation.
(1) Amount represents Sears share of net income of its former subsidiary,
The Allstate Corporation, which was spun-off to Sears shareholders in June,
1995.
SEARS, ROEBUCK AND CO.
CONSOLIDATED INCOME
Twelve Months Ended
(millions,except per Dec. 28, Dec. 30, Percent
common share date) 1996 1995 * Change
Revenues
Merchandise sales and services $ 33,812 $ 31,188 8.4
Credit revenues 4,424 3,807 16.2
Total revenues 38,236 34,995 9.3
Cost and expenses
Cost of sales, buying and occupancy 24,925 23,202 7.4
Selling and administrative 8,030 7,391 8.6
Depreciation and amortization 697 580 20.2
Provision for uncollectible accounts 1,136 744 52.8
Interest 1,365 1,373 (0.5)
Total costs and expenses 36,153 33,290 8.6
Operating income 2,083 1,705 22.2
Other income 22 23 -
Income before income taxes 2,105 1,728 21.8
Income taxes 834 703 18.5
Income from continuing operations 1,271 1,025 24.0
Income from discontinued operations,
net of income taxes (1) - 776 -
Net income $ 1,271 $ 1,801 (29.4)
Income from continuing operations
consists of:
Domestic operations $ 1,276 $ 1,055 20.9
International operations (5) (30) -
Income from continuing operations $ 1,271 $ 1,025 24.0
Earnings per common share, after
allowing for dividends on preferred shares:
Income from continuing operations $ 3.12 $ 2.53
Discontinued operations (1) - 1.97
Net income $ 3.12 $ 4.50
Average common and common
equivalent shares outstanding 399.1 394.0
* Certain reclassifications have been made to 1995 balances to conform with
current year presentation.
(1) Amount represents Sears share of net income of its former subsidiary,
The Allstate Corporation, which was spun-off to Sears shareholders in June,
1995.
SEARS, ROEBUCK AND CO.
CONSOLIDATED INCOME
Three Months Ended
(millions, except per Dec. 28, Dec. 30, Percent
common share data) 1996 1995 * Change
Revenues
Merchandise sales and services $ 10,883 $ 9,858 10.4
Credit revenues 1,159 1,008 15.0
Total revenues 12,042 10,866 10.8
Costs and expenses
Cost of sales, buying and occupancy 7,827 7,215 8.5
Selling and administrative 2,371 2,142 10.7
Depreciation and amortization 195 160 20.9
Provision for uncollectible accounts 342 223 53.8
Interest 352 349 1.3
Total costs and expenses 11,087 10,089 9.9
Operating income 955 777 22.8
Other income (loss) (22) 3 -
Income before income taxes 933 780 19.5
Income taxes 366 325 12.5
Income from continuing operations 567 455 24.6
Income from discontinued operations,
net of income taxes (1) - - -
Net income $ 567 $ 455 24.6
Income from continuing operations
consists of:
Domestic operations $ 531 $ 462 14.8
International operations 36 (7) -
Income from continuing operations $ 567 $ 455 24.6
Earnings per common share, after
allowing for dividends on preferred shares:
Income from continuing operations $ 1.42 $ 1.13
Discontinued operations (1) - -
Net income $ 1.42 $ 1.13
Average common and common
equivalent shares outstanding 398.4 397.5
* Certain reclassifications have been made to 1995 balances to conform with
current year presentation.
(1) Amount represents Sears share of net income of its former subsidiary,
The Allstate Corporation, which was spun-off to Sears shareholders in June,
1995.
SEARS, ROEBUCK AND CO.
SUPPLEMENTARY DOMESTIC OPERATIONS INFORMATION
Three Months Ended Twelve Months Ended
(millions, except number Dec. 28, Dec. 30, Dec. 28, Dec. 30,
of stores) 1996 1995 * 1996 1995 *
Revenues
Domestic merchandising sales
and services $ 9,837 $ 8,863 $ 30,742 $ 28,173
Domestic credit revenues 1,085 924 4,106 3,455
Total revenues 10,922 9,787 34,848 31,628
Costs and Expenses
Cost of sales, buying and
occupancy 7,091 6,477 22,620 20,908
Selling and administrative 2,129 1,905 7,232 6,613
Depreciation and amortization 179 142 630 513
Provision for uncollectible
accounts 328 195 1,081 682
Interest 311 303 1,191 1,183
Total costs and expenses 10,038 9,022 32,754 29,899
Operating income-Domestic
operations $ 884 $ 765 $ 2,094 $ 1,729
Comparable store sales increase 5.4% 5.8% 5.8% 4.7%
Gross margin ratio 27.9% 26.9% 26.4% 25.8%
Selling and administrative expense
ratio 19.5% 19.5% 20.8% 20.9%
Pretax LIFO charge (credit) $ (27) $ (5) $ 19 $ 19
Domestic inven- FIFO $ 4,962 $ 4,319
- LIFO $ 4,232 $ 3,608
Three Months Ended Twelve Months Ended
Dec. 28, Dec. 30, Dec. 28, Dec. 30,
Domestic credit revenues: 1996 1995 * 1996 1995 *
Gross finance charges and other
revenues $ 1,182 $ 1,003 $ 4,454 $ 3,781
Funding cost on securitized
receivables (97) (79) (348) (326)
Total $ 1,085 $ 924 $ 4,106 $ 3,455
Twelve Months Ended
Dec. 28, Dec. 30,
Domestic credit receivables: 1996 1995 *
Gross credit card receivables $ 26,731 $ 23,742
Receivable balances sold (6,330) (4,549)
Owned credit card receivables $ 20,401 $ 19,193
Domestic merchandising
Full-Line Stores Off-the-Mall Gross
Large Sized All Other Total Stores **Square Feet
December 30, 1995 * 426 380 806 2,264 133.5
Opened 21 - 21 384 15.5
Closed (1) (5) (6) (97) (2.8)
December 28, 1996 446 375 821 2,551 146.2
* Certain reclassificiations have been made to 1995 balances to conform with
current year presentation
** December 30, 1995 store count adjusted to report Sears Auto Centers as
separate stores.
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