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Sears Reports Third-Quarter 2001 Earnings

Comfortable with Analysts' Consensus Estimates for 2001 Earnings

Sears, Roebuck and Co. (NYSE: S) today reported third-quarter 2001 earnings of $262 million or $0.80 per share, an increase of 5.3 percent on a per share basis, over comparable basis third quarter 2000 net income of $261 million or $0.76 per share.

"While the current retail sales environment is very challenging, we are pleased that we delivered operating income growth in our core retail and credit businesses," said Chairman and Chief Executive Officer, Alan J. Lacy. "Our strong retail earnings growth reflects our heightened focus on bottom line results. By tightly controlling margins, inventories and expenses, we more than offset lower retail revenues. Our credit business should continue to build receivables growth momentum while maintaining strong portfolio credit quality."

Reported earnings in the third quarter of 2000 of $0.81 per share included net securitization income of $17 million or $0.05 per share.

Retail and Related Services

Retail and related services revenues for the third quarter of 2001 of $7.33 billion were 1.8 percent below last year's third quarter revenues of $7.47 billion. Sales increases by The Great Indoors, dealer stores and Sears repair services were offset by declines in full-line stores.

"The uncertainty of the economic environment continues to negatively impact sales within the full-line stores," said Lacy. In hardlines, strong growth in appliances and Sears Automotive Centers as well as an increase in lawn and garden sales were offset by decreases in other hardlines categories. In softlines, strong home decor results were driven by the sale of mattresses which were reintroduced by full-line stores in the second quarter of this year. These increases were offset by lower sales in other softlines categories.

Retail and related services gross margin rate improved by 30 basis points to 25.6 percent. Full-line hardlines and softlines businesses, hardware stores and Sears repair services contributed to the margin expansion.

Selling and administrative spending was 1.5 percent lower than third quarter 2000 due to decreases in expenses in full-line stores and direct to customer, partially offset by higher investment in The Great Indoors. Selling and administrative expenses were 22.1 percent of sales compared with 22.0 percent last year as lower revenues continued to constrain expense leverage on a rate basis.

Retail and related services posted operating income of $82 million as compared with operating income of $69 million in the prior year period.

Credit and Financial Products

Third-quarter domestic credit and financial products revenues increased 0.9 percent from a year ago, to $1.31 billion as higher average receivable balances offset a lower portfolio yield. Credit receivables at the end of the third quarter grew 1.7 percent over the prior year.

Funding costs declined by $39 million or 10.2 percent from last year's quarter due to a favorable interest rate environment. Operating expenses increased by 4.0 percent over last year.

The provision for uncollectible accounts increased by $39 million or 11.9 percent over last year's period. The net charge-off rate increased to 5.62 percent from 4.97 percent a year ago. This increase was expected due to higher credit customer bankruptcy filings this year. Bankruptcy filings have declined in the third quarter from second quarter levels. Delinquencies at the end of the third quarter improved to 7.41 percent versus 7.47 percent in last year's quarter. The domestic allowance for uncollectible accounts of $1.1 billion is unchanged from the end of the second quarter.

Operating income excluding non-comparable items increased by $4 million or 1.0 percent to $393 million as favorable funding costs and higher revenues more than offset higher provision expense.

Sears Canada

Sears Canada revenue increased 1.7 percent to $1.0 billion in the third quarter of 2001. Sales increases from new stores were partially offset by a 4 percent decline in the value of the Canadian dollar relative to the U.S. dollar. Sears Canada's operating loss of $4 million compares with operating income of $21 million in last year's quarter. The $25 million profit decline resulted from sluggish sales coupled with increased markdowns and higher expenses to support stores opened in 2000.

Corporate and Other

Revenues from the home improvement services businesses included in the Corporate and Other segment increased by 14.9 percent to $108 million. Segment operating loss was $18 million worse than the third quarter of last year primarily due to consulting expenses related to full line store and home office strategic reviews. Other income improved by $21 million primarily due to dividends and higher earnings from unconsolidated subsidiaries. The company repurchased 3.0 million shares of Sears common stock during the quarter at a cost of $101 million.

Outlook

"Although the current climate has created a high degree of uncertainty regarding consumer spending for the holiday season, we are comfortable with analysts' current full-year 2001 consensus estimates of $4.09, excluding non- comparable items and net securitization income," said Lacy.

Forward-Looking Statements

This release contains forward-looking statements, including the Outlook. The statements are based on assumptions about the future, which are subject to risks and uncertainties, such as competitive conditions in retail, the effects of the current economic climate, including changes in consumer confidence, changes in interest rates, delinquency and charge-off trends in the credit card receivables portfolio, customer reactions to the company's strategic initiatives, and normal business uncertainty. In addition, Sears typically earns a disproportionate share of its operating income in the fourth quarter due to seasonal buying patterns, which are difficult to forecast with certainty, particularly given recent national developments. The company believes its forward-looking statements are reasonable, but cautions that actual results could differ materially. The company intends these forward- looking statements to speak only at the time of this release and does not undertake to revise or confirm them 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 and approximately 300,000 employees nationwide. The company serves families in the U.S. through Sears stores nationwide, including approximately 860 full- line stores. Sears also offers a wide variety of merchandise and services through its Web site, sears.com. Sears, Roebuck and Co. is the majority owner of Sears Canada Inc. The company makes available by phone a recorded message on sales performance of its domestic stores. The message is updated weekly and can be heard by calling (847) 286-6111.

  SEARS, ROEBUCK AND CO.
  CONSOLIDATED INCOME

                          For the 13 Weeks Ended   For the 39 Weeks Ended
     (millions, except    September 29, 2001 and   September 29, 2001 and
      earnings per share)   September 30, 2000      September 30, 2000
                          2001   2000   % Change  2001    2000   % Change

  Revenues
    Merchandise sales
     and services       $8,371  $8,480   -1.3%  $25,002  $25,121   -0.5%
    Credit and
     financial products
     revenues            1,382   1,113   24.2%    3,834    3,442   11.4%
       Total revenues    9,753   9,593    1.7%   28,836   28,563    1.0%

  Costs and expenses
    Cost of sales,
     buying and
     occupancy           6,201   6,284   -1.3%   18,519   18,595   -0.4%
    Selling and
     administrative      2,197   2,152    2.1%    6,484    6,297    3.0%
   Depreciation and
    amortization           209     209    0.0%      649      634    2.4%
   Provision for
    uncollectible
    accounts               377     200   88.5%      929      660   40.8%
   Provision for
    previously
    securitized
    receivables              -       -        -     522        -        -
   Interest                378     305   23.9%    1,094      931   17.5%
   Special charges and
    impairments              -       -        -     287        -        -
     Total costs
       and expenses      9,362   9,150    2.3%   28,484   27,117    5.0%

  Operating income         391     443  -11.7%      352    1,446  -75.7%
  Other income, net         22       1        -      30        7        -

  Income before income
   taxes and minority
   interest                413     444   -7.0%      382    1,453  -73.7%

  Income taxes            (150)   (159)  -5.7%     (136)    (531) -74.4%

  Minority interest         (1)     (7) -85.7%       (5)     (21) -76.2%

  Net income              $262    $278   -5.8%     $241     $901  -73.3%


  Earnings per share:

    Basic                $0.81   $0.82   -1.2%    $0.74    $2.58  -71.3%

    Diluted              $0.80   $0.81   -1.2%    $0.73    $2.57  -71.6%

  Average common and
   dilutive common
   equivalent shares
   outstanding           326.9   341.8            329.5    350.1


  SEARS, ROEBUCK AND CO.
  CONSOLIDATED BALANCE SHEET

  (millions)
                                             Sept. 29,   Sept. 30,  Dec. 30,
                                               2001        2000      2000
  Assets
    Current Assets
      Cash and cash equivalents                $449        $497      $842
      Retained interest in transferred
       credit card receivables                    -       3,847     3,105
      Credit card receivables, net           26,720      15,899    17,317
      Other receivables                         631         406       506
      Merchandise inventories                 6,002       6,323     5,618
      Prepaid expenses and deferred charges     516         507       486
      Deferred income taxes                     911         651       920
        Total current assets                 35,229      28,130    28,794

    Property and equipment, net               6,684       6,391     6,653
    Deferred income taxes                       256         352       174
    Other assets                              1,119       1,477     1,278
      Total assets                          $43,288     $36,350   $36,899

  Liabilities
    Current liabilities
      Short-term borrowings                  $3,503      $4,238    $4,280
      Current portion of long-term debt
       and capitalized leases                 3,246       2,490     2,560
      Accounts payable and other liabilities  6,825       6,736     7,336
      Unearned revenues                       1,130       1,049     1,058
      Other taxes                               424         436       562
        Total current liabilities            15,128      14,949    15,796

    Long-term debt and capitalized leases    18,918      11,523    11,020
    Postretirement benefits                   1,812       2,017     1,951
    Minority interest and other liabilities   1,299       1,420     1,363
       Total liabilities                     37,157      29,909    30,130

  Commitments and Contingent Liabilities

  Shareholders' Equity
    Common shares                               323         323       323
    Capital in excess of par value            3,519       3,540     3,538
    Retained income                           6,991       6,613     6,979
    Treasury stock - at cost                 (4,143)     (3,620)   (3,726)
    Deferred ESOP expense                       (69)       (105)      (96)
    Accumulated other comprehensive loss       (490)       (310)     (249)
      Total shareholders' equity              6,131       6,441     6,769

      Total liabilities and shareholders'
       equity                               $43,288     $36,350   $36,899

      Total common shares outstanding         322.1       336.7     333.2


  SEARS, ROEBUCK AND CO.
  Segment Income Statements
  (millions)

  For the 13 Weeks Ended September 29, 2001 and September 30, 2000



        Excluding Non-Comparable Items and Securitization Income

                                    Retail & Related      Credit & Financial
                                         Services              Products
                                      2001       2000       2001      2000

  Total Revenues                     $7,333     $7,471     $1,309    $1,297

  Costs and expenses
    Cost of sales, buying and
     occupancy                        5,455      5,579          -         -
    Selling and administrative        1,620      1,644        202       195
    Depreciation and amortization       169        174          5         4
    Provision for uncollectible
     accounts                             -          -        366       327
    Provision for previously
     securitized receivables              -          -          -         -
    Interest                              7          5        343       382
    Special charges
     and impairments                      -          -          -         -
      Total costs and expenses        7,251      7,402        916       908

  Operating income                      $82        $69       $393      $389



                                      Corporate & Other      Sears Canada

                                       2001       2000      2001       2000

  Total Revenues                       $108        $94     $1,003      $986

  Costs and expenses
    Cost of sales, buying and
     occupancy                           48         36        698       669
    Selling and administrative          125        105        250       242
    Depreciation and amortization        15         15         20        16
    Provision for uncollectible
     accounts                             -          -         11        10
    Provision for previously
     securitized receivables              -          -          -         -
    Interest                              -          -         28        28
    Special charges and impairments       -          -          -         -
      Total costs and expenses          188        156      1,007       965

  Operating income                     $(80)      $(62)       $(4)      $21





                                                               Total

                                                        2001           2000

  Total Revenues                                       $9,753         $9,848

  Costs and expenses
    Cost of sales, buying and occupancy                 6,201          6,284
    Selling and administrative                          2,197          2,186
    Depreciation and amortization                         209            209
    Provision for uncollectible accounts                  377            337
    Provision for previously securitized
     receivables                                            -              -
    Interest                                              378            415
    Special charges and impairments                         -              -
      Total costs and expenses                          9,362          9,431

  Operating income                                       $391           $417

  Net Income                                             $262           $261

  EPS - Diluted                                         $0.80          $0.76

  Average shares o/s                                    326.9          341.8





                                                          Reconciling Items

                                          Securitization      Non-comparable
                                             Impact                items
                                         2001       2000       2001     2000

  Total Revenues                           $-      $(255)       $-       $-

  Costs and expenses
    Cost of sales, buying and occupancy     -          -         -        -
    Selling and administrative              -        (34)        -        -
    Depreciation and amortization           -          -         -        -
    Provision for uncollectible accounts    -       (137)        -        -
    Provision for previously securitized
     receivables                            -          -         -        -
    Interest                                -       (110)        -        -
    Special charges and impairments         -          -         -        -
      Total costs and expenses              -       (281)        -        -

  Operating income                         $-        $26        $-       $-

  Net Income                               $-        $17        $-       $-

  EPS - Diluted                            $-      $0.05        $-       $-

  Average shares o/s                    326.9      341.8     326.9    341.8



                                                         Consolidated GAAP

                                                        2001          2000

  Total Revenues                                       $9,753        $9,593

  Costs and expenses
    Cost of sales, buying and
     occupancy                                          6,201         6,284
    Selling and administrative                          2,197         2,152
    Depreciation and amortization                         209           209
    Provision for uncollectible
     accounts                                             377           200
    Provision for previously
     securitized receivables                                -             -
    Interest                                              378           305
    Special charges and impairments                         -             -
      Total costs and expenses                          9,362         9,150

  Operating income                                       $391          $443

  Net Income                                             $262          $278

  EPS - Diluted                                         $0.80         $0.81

     Average shares o/s                                 326.9         341.8



  For the 39 Weeks Ended September 29, 2001 and September 30, 2000


  Excluding Non-Comparable Items and Securitization Income

                                   Retail & Related      Credit & Financial
                                       Services                Products

                                    2001        2000        2001      2000

  Total Revenues                   $21,942     $22,189     $3,885    $3,940

  Costs and expenses
    Cost of sales, buying and
     occupancy                      16,325      16,531          -         -
    Selling and administrative       4,827       4,795        608       590
     Depreciation and amortization     530         532         14        12
     Provision for uncollectible
      accounts                           -           -      1,050     1,019
     Provision on previously
      securitized receivables            -           -          -         -
     Interest                           21          16      1,110     1,146
     Special charges and impairments     -           -          -         -
       Total costs and expenses     21,703      21,874      2,782     2,767

  Operating income                    $239        $315     $1,103    $1,173


                                     Corporate & Other      Sears Canada

                                      2001        2000      2001      2000

  Total Revenues                      $304        $259     $2,980    $2,894

  Costs and expenses
    Cost of sales, buying and
     occupancy                         131         106      2,063     1,958
    Selling and administrative         347         307        741       703
    Depreciation and amortization       44          39         61        51
    Provision for uncollectible
     accounts                            -           -         32        29
    Provision on previously
     securitized receivables             -           -          -         -
    Interest                             -           -         86        84
    Special charges and impairments      -           -          -         -
      Total costs and expenses         522         452      2,983     2,825

  Operating income                   $(218)      $(193)       $(3)      $69


                                                              Total

                                                       2001           2000

  Total Revenues                                     $29,111        $29,282

  Costs and expenses
    Cost of sales, buying and occupancy               18,519         18,595
    Selling and administrative                         6,523          6,395
    Depreciation and amortization                        649            634
    Provision for uncollectible accounts               1,082          1,048
    Provision on previously securitized receivables        -              -
    Interest                                           1,217          1,246
    Special charges and impairments                        -              -
      Total costs and expenses                        27,990         27,918

  Operating income                                    $1,121         $1,364


  Net Income                                            $728           $849

  EPS - Diluted                                        $2.21          $2.43

  Average shares o/s                                   329.5          350.1


                                              Reconciling Items

                                       Securitization         Non-comparable
                                            Impact                items

                                        2001      2000        2001      2000

  Total Revenues                       $(275)    $(719)        $-        $-

  Costs and expenses
    Cost of sales, buying and occupancy    -         -          -         -
    Selling and administrative           (39)      (98)         -         -
    Depreciation and amortization          -         -          -         -
    Provision for uncollectible
     accounts                           (153)     (388)         -         -
    Provision on previously
     securitized receivables               -         -        522         -
    Interest                            (123)     (315)         -         -
    Special charges and impairments        -         -        287         -
      Total costs and expenses          (315)     (801)       809         -

  Operating income                       $40       $82      $(809)       $-


  Net Income                             $26       $52      $(513)       $-

  EPS - Diluted                        $0.08     $0.15     $(1.56)       $-

  Average shares o/s                   329.5     350.1      329.5     350.1


                                                       Consolidated GAAP

                                                      2001           2000

  Total Revenues                                     $28,836        $28,563

  Costs and expenses
    Cost of sales, buying and occupancy               18,519         18,595
    Selling and administrative                         6,484          6,297
    Depreciation and amortization                        649            634
    Provision for uncollectible accounts                 929            660
    Provision on previously securitized receivables      522              -
    Interest                                           1,094            931
    Special charges and impairments                      287              -
      Total costs and expenses                        28,484         27,117

  Operating income                                      $352         $1,446


  Net Income                                            $241           $901

  EPS - Diluted                                        $0.73          $2.57

  Average shares o/s                                   329.5          350.1



  SEARS, ROEBUCK AND CO.
  SUPPLEMENTAL INFORMATION - DOMESTIC CREDIT CARD RECEIVABLES, INVENTORY
  AND STORE COUNT
  (millions)



                                 Average Balance           Ending Balance
                  For the 13 Weeks      For the 39 Weeks
                         ended               ended
                   Sept. 29, 2001      Sept. 29, 2001
                  and Sept. 30, 2000  and Sept. 30, 2000 Sept. 29, Sept. 30,
                     2001      2000      2001     2000     2001      2000
  Managed domestic
   credit card
   receivables      $26,089   $25,453   $26,138   $25,655  $26,264   $25,825


                    For the 13 Weeks    For the 39 Weeks
                        ended                ended
                     Sept. 29, 2001      Sept. 29, 2001
                    and Sept. 30, 2000  and Sept. 30, 2000

  Domestic managed
   credit card
   receivables-       2001       2000     2001      2000
  Net interest margin:
  Portfolio yield    19.34%     19.70%   19.16%    19.86%
  Effective
   financing rate     5.19%      5.97%    5.61%     5.92%
  Net interest
   margin            14.15%     13.73%   13.55%    13.94%

  Domestic managed
   net charge-off
   rate               5.62%      4.97%    5.36%     5.24%



                                        2001                     2000

                            Sep. 29,  Jun. 30,  Mar. 31,  Dec. 30,  Sep. 30,
                              2001      2001      2001      2000      2000

  Domestic managed credit
   card receivables-
  Delinquency rate           7.41%     7.26%      7.50%     7.56%     7.47%

  Allowance for
   uncollectible accounts   $1,089   $1,089        $567      $649      $624

  Allowance % of domestic
   on-book credit card
   receivables               4.15%    4.19%       4.14%     4.03%     4.18%


                                                      Sept. 29, Sept. 30,
                                                        2001      2000

  Domestic inventories  -LIFO                          $5,303    $5,604
                        -FIFO                          $5,899    $6,230



                                   For the 13 Weeks       For the 39 Weeks
                                        Ended                 Ended
                                  Sept. 29, 2001 and      Sept. 29, 2001 and
                                   Sept. 30, 2000          Sept. 30, 2000

  Pretax LIFO charge                  $6        $6        $30       $30


                                  Dec. 30,                       Sept. 29,
  Domestic retail stores:           2000      Opened     Closed     2001

    Full-line stores                 863           3         (5)     861
    Specialty formats              2,158          32        (55)   2,135
      Total                        3,021          35        (60)   2,996

    Gross square feet              147.3         1.7       (1.8)   147.2

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SOURCE: Sears, Roebuck and Co.

Contact: Peggy A. Palter of Sears Roebuck and Co., +1-847-286-8361

Website:








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