ÆäÀÌÁö À̹ÌÁö
PDF
ePub
[blocks in formation]

In 1972, your Company established records in net sales, net income and dividends paid to shareholders.

Net sales increased 9.8 per cent to $10,991 million, a new high for the 18th consecutive year.

Net income was $622 million, or $3.98 per share, a record for the 12th year in a row. This included a non-recurring gain amounting to five cents per share and was 12.9 per cent over net income of $551 million, or $3.56 per share in 1971. Operating income from sales of merchandise and services rose 6.1 per cent to $1,096 million from $1,033 million the prior year.

Dividends to shareholders were increased 11 cents to $1.61 per share. This was the 38th year for uninterrupted dividend payments.

The Allstate group-insurance operations and financial services-contributed $1.05 per share to Sears net income, compared with 85 cents in 1971. A complete report on Allstate begins on Page 31.

PRICE CONTROLS

During the past year, Sears has given its full support to Phase II of the government's program to restrain inflation. Special procedures were used to insure compliance. In our current General Catalog, items previously carried in 1972 catalogs show an aggregate price increase of less than two per cent. A pricemonitoring survey in our retail stores shows an aggregate increase of less than two and one-half per cent since August, 1971. Every effort will be made to comply with Phase III guidelines in the months to come.

EXPANSION

During the year Sears opened 33 retail stores, including 18 in new markets and 15 which replaced older facilities in existing markets. This expansion program added 3.9 million square feet of gross space to the retail store system, bringing the total to more than 94 million square feet.

The Columbus, Ohio, Catalog Merchandise Distribution Center-which is discussed in the special section beginning on page 5-began operations mid-year in 1972. In addition, major enlargements were completed in the Greensboro, Los Angeles and Memphis Catalog Centers. In all, more than 4.5 million square feet were added to our catalog system last year.

Our 1973 expansion plans call for opening 29 stores, including 13 in new markets. Additions to retail gross space will exceed 3.5 million square feet. Construction will continue on the 1.6-million-square-foot Jacksonville, Florida, Catalog Merchandise Distribution Center with completion scheduled for 1975.

Construction of Sears Tower, the Company's new headquarters in downtown Chicago, continues; initial occupancy is expected later this year. A new headquarters building for Sears Eastern Territory, presently under construction in suburban Philadelphia, is expected to be opened in early 1974.

MANAGEMENT CHANGES

On November 13, the Board of Directors elected Arthur M. Wood to succeed Gordon M. Metcalf as Chairman of the Board, effective February 1, 1973. Mr. Wood became President of the Company on February 1, 1968. His prior service included two years as Company Comptroller and six years as a Territorial Vice President.

A. Dean Swift, Vice President in charge of the Company's Southern Territory from 1969 through 1972, was elected to succeed Mr. Wood as President. A. M. Prado was elected Vice President of the Southern Territory to succeed Mr. Swift. Mr. Prado was elected a director on February 5, 1973. He has served for the past 10 years as General Manager of our growing retail operations in the south Florida

area.

We regret to report the death of Stephen C. Hanson, Divisional Vice President and General Manager of Sears fashion buying headquarters in New York. A veteran of some 40 years in merchandising, 17 with Sears in New York, Mr. Hanson made many significant contributions to the Company's growth.

Calvin Fentress, Jr., former Chairman of the Board of Allstate Insurance Company and a director of Sears since 1948, has reached the age of retirement for Company directors and will not stand for reelection at the Shareholders Meeting to be held on May 21, 1973. His contributions to Allstate and Sears were many, and they will continue to be manifested for many years to come.

Also retiring is Eleanor P. Sheppard, former Mayor of Richmond, Virginia, and a member of the Virginia House of Delegates. We are proud to have had Mrs. Sheppard as a director of the Company and thank her for her contribution. Mrs. Norma Pace, a nationally recognized economist, now Special Consultant to Lionel D. Edie & Company, Incorporated, has been nominated for election to the Board of Directors. She will be the third woman to serve on Sears Board.

Charles A. Meyer, former Vice President and director of the Company, is returning as Vice President-Corporate Planning, having completed an outstanding term of service as the nation's Assistant Secretary of State for Inter-American Affairs. He will stand for election to the Board of Directors at the annual meeting of shareholders.

LOOKING AHEAD

Prospects for a strong economy in 1973 have been universally recognized. Plant expansion continues at a high rate as do private housing starts. Consumers will have more disposable income as wages increase, income tax refunds are distributed and employment increases. A record number of Americans are employed in the American work force-some 2.7 million more than a year ago at this time. It is predicted that 2.5 million additional persons will obtain jobs in the current year. With these strong underpinnings, 1973 should be a good year for Sears and the general merchandise industry.

Possible problems exist in the risk of a new inflationary push despite efforts of the Administration to control government spending. The impact of Phase III on wage and price increases is uncertain at this time. As operating costs and the cost of manufactured goods increase there must be adjustments at the retail level. To date, prices charged by our suppliers have been relatively stable, and Sears prices reflect this stability.

Sears believes it is essential that government, labor and industry exercise restraint in economic decisions during 1973. An over-heated economy could generate serious problems in 1974.

COMMITMENT TO THE FUTURE

Your officers and the management team at Allstate are dedicated to maintaining the sound growth and profitability of the Sears complex. With the continuing efforts of our loyal and skilled employees, we will seek to take advantage of the opportunities that lie ahead. We thank our employees for their contribution during 1972 and our customers for their support. We express our appreciation to the thousands of suppliers of Sears merchandise for their efforts in the manufacture and timely delivery of the goods we sell.

CREDIT OPERATIONS

Credit sales during 1972 totaled $6,273 million, resulting in accounts receivable at year end of $4,268 million-$2,385 million easy payment and $1,883 million revolving charge.

In September, 1972, the Company adopted in most states a new method of computing finance charges on revolving charge accounts. Under the new method, the revolving charge account finance charge is computed on the average daily balance excluding current purchases. Monthly payments are based on balance due with a minimum payment of $10 per month.

Easy Payment accounts continued as traditional installment accounts with terms payable up to 36 months; on certain home improvements, five year terms are offered.

Based on 1972 experience, the average maturity of our accounts is 26.2 months for an easy payment account and 9.25 months for a revolving charge account. The ratio of credit sales to total sales was 52.3 per cent compared with 52.7 per cent for 1971.

Customer accounts increased 696 thousand to 18.5 million. There were 11.4 million active revolving charge accounts with an average balance of $165, and 7.1 million active easy payment accounts with an average balance of $335.

Included in the $4,268 million installment accounts receivable are balances due after one year of $687 million which are expected to earn finance charge income at annual percentage rates ranging from ten to twenty per cent. Collection experience for 1972 continued at a satisfactory level. As of year end there were 152,096 accounts delinquent three or more monthly payments. The number of defaulted accounts (less than one full monthly payment received during the previous six months) totaled 4,047. The allowance for uncollectible accounts was $80 million at year end and, based on past experience, is adequate to cover anticipated write-offs. The net provision for uncollectibles for 1972 was $42 million. This represents 0.7 per cent of credit sales. Collections on charged-off accounts were $7.1 million. Unearned finance charges were $191 million, up $7 million from the close of 1971.

Credit operations resulted in $39 million income over expense compared with $37 million for 1971. Finance charge income and credit costs are presented on page 25, note 7, conforming with a standard adopted within the retail industry.

INVENTORIES REACH $1.6 BILLION

Merchandise inventories increased $213 million to $1,642 million at year end. This increase reflected the merchandise required for new stores, new lines and coverage for the anticipated increase in Spring season sales.

Merchandise on order and in transit amounted to $2.3 billion at the close of 1972.

WORKING CAPITAL $2.3 BILLION

Working capital (the excess of current assets over current liabilities) increased $271 million to $2,330 million at year end. Current assets of $6,207 million were 1.6 times current liabilities of $3,877 million at the close of the year. The statement of Changes in Financial Position on page 23 details the source and use of working capital.

LONG-TERM DEBT UP $220 MILLION

Long-term debt was $916 million compared with $696 million at year end 1971. Long-term debt rose a net of $220 million-an increase of $232 million in Sears Roebuck Acceptance Corp.'s 13 month notes less the purchase of $12 million of Sears 44% Sinking Fund Debentures.

SHORT-TERM BORROWINGS REACH $2.1 BILLION

Short-term borrowings increased $201 million to $2,108 million at year end. Sears Roebuck Acceptance Corp. supplied $1,815 million of these funds. In October, the Company made a $75 million additional capital investment in SRAC, a wholly owned consolidated subsidiary which assists in financing Sears credit sales.

A condensed statement of financial position follows:

[merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][subsumed][subsumed][merged small]
[blocks in formation]

The

As you requested, we have prepared the attached analysis of the costs incurred and service charge revenues accrued in granting revolving credit to Arizona customers by a group of retailers during the fiscal year 1970. revolving credit sales of the participating retailers included in this analysis exceed 90% of estimated statewide retail store revolving credit sales during fiscal 1970. The analysis is based on data furnished to us by the retailers. In preparing it, we employed allocation and sampling techniques that we believed appropriate in the circumstances.

In our opinion, based on the data furnished to us, the attached report is a reasonable analysis of the costs of providing revolving credit to Arizona customers by the sample retailers during fiscal year 1970.

[merged small][ocr errors]
« ÀÌÀü°è¼Ó »