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Sears Holdings Reports Q2 Results
Sep 8, 2005
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Sears Holdings Corporation issued its financial statements for the quarter ended July 30, 2005. Sears Holdings Corporation was created in connection with the merger of Kmart Holding Corporation and Sears, Roebuck and Co., which was completed on March 24, 2005. As of July 30, 2005, the company had more than U.S. $2 billion of cash and cash equivalents, up from $1.6 billion at the end of the first quarter. During the second quarter of 2005, the company reduced its outstanding debt and capital lease obligations by $227 million to $4.2 billion. Holdings' inventory level at July 30, 2005 was approximately $9 billion, an increase of $5.8 billion over the prior year as a result of the merger. The merchandise payable balance was $3.5 billion at July 30, 2005 compared to $3.8 billion for Sears and Kmart combined as of July 28, 2004.

Kmart comparable store sales and total sales decreased 0.3 percent and 3.2 percent, respectively, for the 13-week period ended July 30, 2005 compared to the 13-week period ended July 28, 2004. Total sales were negatively impacted by a reduction in the total number of operating Kmart stores. While Kmart's same-store sales declined as a result of lower transaction volumes, several businesses, including apparel, had positive same-store sales during the period. Sears Domestic sales declined 3 percent for the quarter. The decline was due to a 7.4 percent decrease in domestic comparable store sales partially offset by strong home services sales. The decline in Sears Domestic comparable store sales reflects efforts initiated in 2005 to improve gross margin by reducing reliance on certain promotional events and reducing inventory levels to lower merchandise holding costs.

Operating income for the quarter increased $49 million reflecting the inclusion of Sears, which had $225 million in operating income in the quarter, partially offset by $68 million less in gains on the sale of assets realized this year and $42 million in restructuring charges recognized in the current quarter related to the merger. In addition, the effect of purchase accounting adjustments that resulted from the merger reduced operating income by $75 million.

Sears Holdings also announced several organizational and executive changes effective September 30, 2005. Aylwin B. Lewis will assume the position of CEO and president of Sears Holdings, with responsibility for the company's 3,900 stores, as well as home services, finance, legal, supply chain, information technology, and human resources. Edward S. Lampert, Sears Holdings' chairman, will lead Sears Holdings' initiatives. Lampert will direct the marketing, merchandising, design, and on-line businesses of Sears Holdings, as well as Lands' End, to ensure that these initiatives are clearly focused on responding to customer needs. William C. Crowley, Sears Holdings' Chief Financial Officer, will assume additional responsibilities associated with the newly created role of Chief Administrative Officer. Alan J. Lacy will continue to serve as vice chairman, a director and as a member of the Office of the Chairman. Lacy will also continue to serve as the chairman of the Board of Directors of Sears Canada and, together with Lampert, will focus on merger integration and strategic issues.

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