Sears Holdings Corp. will spin off some 1,250 small stores and sell 11 full-line units to help offset a $2.4 billion fourth quarter loss.

Sears Holdings Corp., Hometown, Outlet, General Growth Properties, Kmart, Sears, Sears president and chief executive Lou D’Ambrosio, Ron Boire, Chief financial officer Rob Schriesheim

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Inside This Issue - News

Some assets to be sold by Sears

March 5th, 2012

HOFFMAN ESTATES, Ill. – Sears Holdings Corp. will spin off some 1,250 small stores and sell 11 full-line units to help offset a $2.4 billion fourth quarter loss.

Sales in the quarter ended January 28 dropped 4% to $12.5 billion. Adjusted earnings of 54 cents per share fell below analysts’ ­expectations.

The retailer will spin off its Hometown and Outlet units and certain hardware stores in this year’s third quarter through a transfer to shareholders, which is expected to raise $400 million to $500 million.

The 11 large stores, from Florida to Hawaii, will be sold to General Growth Properties for $270 million in a deal that is expected to close by early spring.

Sears’ full-year revenues decreased $1.1 billion to $41.6 billion. The decline was primarily due to lower same-store sales and the effect of having fewer Kmart and Sears full-line stores. Fourth quarter domestic same-store sales fell 4.1% at Sears and 2.7% at Kmart. Sears suffered from poor consumer electronics and appliances sales, while Kmart posted weak consumer electronics results, along with softness in pharmacy, jewelry and home ­categories.

"We are taking immediate actions to address our fourth quarter performance," said Sears president and chief executive Lou D’Ambrosio, citing cost and inventory reductions, "honed and targeted marketing," and "margin actions." He noted that the chain was bringing in new talent to strengthen its merchandising and leadership, pointing to Ron Boire, who was named chief merchant and president of the Sears and Kmart formats.

"It’s also important to distinguish between our earnings issue and the strength of our balance sheet, where we have significant assets and liquidity," D’Ambrosio remarked. The spin-off and store sales, along with inventory reductions, will strengthen the balance sheet by roughly $1 billion, he noted.

"As we operationally improve the business, we are also accelerating our actions to lead in integrated retail," said D’Ambrosio. "We are combining our massive retail assets with a set of technology platforms we are building to reshape and deepen our relationships with Shop Your Way Reward members — at the store, online, and in the home."

Chief financial officer Rob Schriesheim commented, "We are an asset-rich enterprise with substantial liquidity. As of the end of fiscal 2011, we had total liquidity of $3.2 billion, $2.2 billion of excess borrowing base under our domestic credit agreement, the ability under our credit agreement to bring in another $1 billion in cash through the existing accordion feature and we also had $760 million in second lien capacity. We have a substantial unencumbered real estate portfolio, well-established stand-alone businesses, including Lands’ End and Sears Canada."