Retail And Related Services This Segment example essay topic

Sears Updates Segment Reporting; Adopts New Accounting Standard Resulting In One-Time Non-Cash Charge Of $520 Million In Second Quarter HOFFMAN ESTATES, Ill., April 12 /PRNewswire/ -- Sears, Roebuck and Co. (NYSE: S) announced total domestic store revenues for the five weeks ending April 7, 2001 were $2.56 billion. Comparable domestic store revenues decreased 5.3 percent. Total domestic store revenues decreased 5.1 percent compared with $2.7 billion for the five weeks ending April 8, 2000. ' March retail sales fell below expectations, with the slowing economy and colder than anticipated weather having an impact on both our hard lines businesses,' said Chairman and Chief Executive Officer Alan J. Lacy.

' Weather-related seasonal apparel and lawn and garden merchandise accounted for over one-third of the comparable store sales decline. Among the better performing businesses was Home Appliances, which continues to gain market share. The Great Indoors format and sporting goods businesses also performed well.'s ears, Roebuck and Co. 5 Weeks 9 Weeks 2001 Domestic Store Revenues $2,563,400,000 4,530,800,0002000 Domestic Store Revenues 2,701,000,000 4,697,600,000 Percent Change (5.1) % (3.6) %Comparable Domestic Stores Percent Change (5.3) % (3.9) %Preliminary Earnings Announcement The company anticipates that earnings per share for the first fiscal quarter of 2001, ended March 31, will be approximately $0.53, versus $0.65 in the first quarter of last year.

In the first quarter, the credit business performed in line with expectations, reflecting continued strong portfolio quality. However, operating income from the credit business for the first quarter will be slightly below last year, mainly due to lower revenues. The domestic retail business did not meet the company's expectations in the first quarter due to sales and margin shortfalls resulting from the slowing economy and cooler than expected spring weather in much of the country. Sears Revises Segment Reporting FASB Statement No. 131 prescribes accounting guidance for segment reporting and requires that a company's externally reported segments be consistent with its internal management structure. Consequently, effective for the first quarter of 2001, Sears is modifying its externally reported segments to reflect the company's integrated retail and related services strategy and to align externally reported business segments with changes that have occurred in the company's internal structure over the past several months.

The company's four new segments are as follows: - Retail and Related Services -- This segment consists of merchandise sales and related services, including service contracts, delivery and product installation and repair services. It covers all Sears selling channels, including specialty and full-line stores as well as direct-to-customer operations which includes online, catalogs and clubs and services. - Credit and Financial Products -- This segment includes Sears domestic credit business and the company's related financial product offerings. - Sears Canada -- Formerly named the International segment, this segment continues to include the results of the company's majority-owned Canadian subsidiary. - Corporate and other -- This segment is composed of home office expenses, holding company items and certain home improvement services businesses, including Sears Termite and Pest Control. First quarter 2001 results, scheduled to be announced April 19, will reflect the revised segment reporting structure.

Financial data for 2000 and 1999 has been restated to reflect the new segment structure and is included with this news release. The changes in segment reporting do not affect consolidated operating income or net income. Sears Adopts New Accounting Standard Resulting In One-Time Charge In the second quarter of 2001, Sears will adopt FASB Statement No. 140,' Accounting for Transfers and Servicing of Financial Assets andExtinguishments of Liabilities,' which establishes new conditions transactions to be accounted for as sales of receivables. Under the provisions of FASB Statement No. 140, which went into effect in April, the company's transactions will be accounted for as secured borrowings. Under the previous accounting standards, the company' were accounted for as sales of receivables. ' The company's application of FASB Statement No. 140 will make our financial reporting significantly less complex, while preserving flexibility in accessing the asset-backed securities market,' said Sears Senior Vice President and Chief Financial Officer Jeffrey N. Boyer.

'This accounting will also provide uniform accounting treatment for all Sears credit card assets and related revenues and expenses. ' In addition, the company's prior transactions will not meet the grandfathering provisions of FASB Statement No. 140. Therefore, effective in the second quarter of 2001, previously credit card receivables will be accounted for as on-book receivables. As a result, the company will consolidate approximately $8 billion of off-balance sheet credit card receivables as well as recognize $8 billion of related debt. In addition, approximately $4 billion of assets will be reclassified to credit card receivables from retained interest in transferred credit card receivables.

Future activity will be accounted for as secured borrowings. A one-time, non-cash pre-tax charge of approximately $520 million will be recorded in the second quarter of 2001. This charge represents the establishment of an allowance for un collectible accounts related to the$12 billion of receivable balances previously off-balance sheet or accounted for as securities and classified on the balance sheet as retained interest in transferred credit card receivables. FASB Statement No. 140 must be applied prospectively beginning April 1. Therefore, prior period financial statements prepared under generally accepted accounting principles will continue to reflect activity as receivable sales through the first quarter of 2001. In the first quarter of 2001, net income will be $0.08 per share as compared with$0.03 per share in last year's quarter.

Prior to the adoption of FASB Statement No. 140, activity had been forecast ed to add approximately $0.24 to 2001 full-year earnings per share, comparable to the amount of net income recorded in 2000. To facilitate inter-period comparisons of the company's financial performance, this news release includes a schedule detailing activity recorded in the company's 2000 and 1999 income statements. Webcast Conference Call Sears will webcast a conference call today, April 12, to further discuss the company's changes in accounting and its segment reporting revisions. The call and webcast will begin at 11: 30 a.m. EDT/10: 30 a.m. CDT.

The webcast and related presentation materials will be accessible on Sears Web site, sears. com, under 'About Sears' on the lower left-hand column of the sears. com home page. The replay will be archived for one week on the 'AboutSears's ection of sears. com. Software necessary to listen to the webcast, Media Player or Real Player, can be downloaded from the webcast site. Downloading the software may take up to 22 minutes with a 56 K speed modem.

Forward-Looking Statements This release contains projections regarding first quarter performance and the effect of the adoption of FASB Statement No. 140, which are 'forward-looking statements. ' Such projections are based on preliminary estimates regarding first quarter costs and expenses, and assumptions about normal quarter-end accounting and valuation adjustments, the timing and frequency of the company's transactions for the balance of 2001, and similar uncertainties. While the company believes its forecasts and assumptions are reasonable, it cautions that actual results could differ materially. The company intends the forward-looking statements in this release to speak only as of the time of this release and does not undertake to update or revise these projections as more information becomes available.

About Sears Sears, Roebuck and Co. is a leading U.S. retailer of apparel, home and automotive products and services, with annual revenue of more than$40 billion. The company serves families across the country through approximately 860 full-line department stores, approximately 2,100 specialized retail locations, and a variety of online offerings accessible through the company's Web site, sears. com. Sears, Roebuck and Co. is the majority owner of Sears Canada Inc. SEARS, ROEBUCK AND CO. Web site: web CONTACT: Janice R. Drummond of Sears, Roebuck & Co., 847-286-8316.