Fitch Affirms Sears' Rtg 'A-/F2' Following Acq of Lands' End

Business Wire, May 13, 2002

Business Editors

NEW YORK--(BUSINESS WIRE)--May 13, 2002

Sears, Roebuck and Co.'s (Sears) 'A-' rated senior unsecured debt is affirmed by Fitch Ratings following Sears' announcement of its acquisition of Lands' End, Inc for $1.9 billion, cash. Fitch has also affirmed its 'A-' rating on Sears Roebuck Acceptance Corp.'s senior notes and its 'F2' rated commercial paper program. Approximately $24.5 billion of domestic debt was outstanding as of March 30, 2002. The Rating Outlook remains Stable.

The affirmations reflect the strategic benefits the Lands' End acquisition is expected to bring to Sears' retail strategy, which has included the rationalization of its private brands and the reconfiguration of the store environment. The Lands' End merchandise will provide Sears' with a point of differentiation from its competition and will complement its other key proprietary brands. Lands' End is expected to operate as a wholly owned subsidiary of Sears, retaining its own design and merchandising teams. The company generated about $1.6 billion in revenues and $160MM in EBITDAR in 2001 and had no net debt at year-end. Sears' expects to have a limited assortment of Lands' End merchandise in its stores in 2002, with full implementation by the fall of 2003. The acquisition is expected to close in June 2002.

While the transaction is expected to place some modest near-term pressure on Sears' credit protection measures, the company is expected to curtail share repurchases and re-direct some of that cash flow to help fund the transaction, with the balance to come from the public debt markets. Fitch expects the company's credit profile to return to more historical levels by the end of 2003.

The ratings continue to reflect Sears' position as the largest middle market general merchandiser and is also supported by Sears' profitable credit operations, which complement the retail business and lend stability to the company's consolidated results. These factors are balanced against ongoing competitive challenges and risks associated with Sears' new strategy for the full-line stores as well as the risks associated with the Lands' End integration.