Sears Canada Reports First Quarter Results and Announces Normal Course Issuer Bid

TORONTO, May 17 /CNW/ - Sears Canada Inc. (TSX: SCC) today announced its unaudited first quarter results. Total revenue for the 13 week period ended April 30, 2011 was $992.5 million compared to $1.068 billion for the 13 week period ended May 1, 2010, a decrease of 7.1%. Same store sales decreased 9.2%.

EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization and Non-Operating Activities) for the quarter this year was a loss of $25.6 million compared to a gain of $35.0 million for the same period last year. Net earnings for the quarter this year were a loss of $49.5 million or 47 cents per share compared to a loss of $8.8 million or 8 cents per share for the same period last year. There were no non-operating activities in the quarter this year or last year.

Commenting on the quarter, Dene Rogers, President and Chief Executive Officer, Sears Canada Inc., said, "Aside from the continuing economic difficulties, several other external factors impacted our results: a cold Spring in most of the country which affected apparel and other seasonal categories, and record-high fuel costs and other household expenses which have led to very high debt-service levels curtailing Canadians' discretionary income. Imminent interest rate increases are also affecting spending levels. These factors have combined to create a very competitive retail climate. In addition, our Home Services business also felt the impact of the end of government sponsored home energy rebate programs. Despite a disappointing quarter, Sears is committed to improving its results and we continue to focus on becoming Canada's No. 1 retailer and improving the lives of Canadians coast to coast."

Due to the transition to International Financial Reporting Standards ("IFRS") effective the first quarter of 2011, all comparative figures for 2010 that were previously reported in the consolidated financial statements prepared in accordance with Canadian generally accepted accounting principles have been restated to conform to the new standards adopted. Please refer to the footnote references accompanying the attached financial information for information on the transition to IFRS and its impact on the Company's financial position, financial performance and cash flows. Further information with respect to the transition to IFRS will be provided in the Company's first quarter 2011 report. EBITDA is a non-IFRS measure; please refer to the table attached for a reconciliation of net earnings to EBITDA.

Normal Course Issuer Bid:

The Company is also announcing today that it intends to file with the Toronto Stock Exchange ("TSX") a Notice of Intention to make a Normal Course Issuer Bid that permits the Company to purchase for cancellation up to 5% of its issued and outstanding common shares, representing 5,268,599 of the issued and outstanding common shares ("Shares"). There are 105,371,995 Shares issued and outstanding, as at May 9, 2011.

Under the Normal Course Issuer Bid, which is subject to TSX approval, purchases may commence on May 25, 2011 and must terminate by May 24, 2012 or on such earlier date as Sears Canada may complete its purchases pursuant to the Notice of Intention filed with the TSX. The total purchase of Shares by Sears Canada pursuant to its Normal Course Issuer Bid will not exceed, in the aggregate, 5% of all outstanding Shares, and will be subject to the limits under the Toronto Stock Exchange rules, including a daily limit of 25% of the average daily trading volume (which, based on the prior six months trading volumes, can not exceed 7,301 Shares a day), and a limit of one block purchase per week (which is not subject to an average daily trading volume limit).

The Board of Directors believes that, if the Company is able to purchase Shares at attractive prices, such purchases will create value for the Company and its continuing shareholders while providing additional liquidity to shareholders who desire to sell their Shares. The Company may not purchase Shares under the Normal Course Issuer Bid if Shares cannot be purchased at prices that the Company considers attractive and decisions regarding the timing of purchases will be also based on market conditions and other factors. Therefore, there is no assurance that any Shares will be purchased under the Normal Course Issuer Bid and the Company may elect to suspend or discontinue the bid at any time.

Sears Canada will report to its shareholders in its quarterly and annual reports as to the status of the Normal Course Issuer Bid. All purchases of Shares pursuant to its Normal Course Issuer Bid will be made by Sears Canada in accordance with the rules of the TSX and effected through the facilities of the TSX. Moreover, Sears Canada will make no purchases of Shares other than open market purchases. Any Shares purchased will be cancelled.

In the preceding twelve month period, Sears Canada purchased 2,249,600 common shares for cancellation at a weighted average purchase price of $19.52 per share.

From time to time, Sears Canada may enter into a pre-defined plan with a designated broker to allow for the repurchase of its common shares under the Normal Course Issuer Bid at times when Sears Canada ordinarily would not be active in the market due to its own internal trading blackout periods, insider trading rules, or otherwise.

This release contains information which is forward-looking and is subject to important risks and uncertainties. Forward-looking information concerns the Company's future financial performance, business strategy, plans, goals and objectives. Factors which could cause actual results to differ materially from current expectations include, but are not limited to: the ability of the Company to successfully implement its cost reduction, productivity improvement and strategic initiatives and whether such initiatives will yield the expected benefits; the results achieved pursuant to the Company's long-term marketing and servicing alliance with JPMorgan Chase Bank, N.A.; general economic conditions; competitive conditions in the businesses in which the Company participates; changes in consumer spending; seasonal weather patterns; customer preference toward product offerings; changes in the Company's relationship with its suppliers; interest rate fluctuations and other changes in funding costs; fluctuations in foreign currency exchange rates; the possibility of negative investment returns in the Company's pension plan; the outcome of pending legal proceedings; and changes in laws, rules and regulations applicable to the Company. While the Company believes that its forecasts and assumptions are reasonable, results or events predicted in this forward-looking information may differ materially from actual results or events.

Sears Canada is a multi-channel retailer with a network that includes 196 corporate stores, 272 hometown dealer stores, 33 home improvement showrooms, 1,800 catalogue merchandise pick-up locations, 108 Sears Travel offices and a nationwide home maintenance, repair, and installation network. The Company also publishes Canada's most extensive general merchandise catalogue and offers shopping online at www.sears.ca.

    <<
    SEARS CANADA INC.
    INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
    Unaudited

                                   As at       As at       As at       As at
                                April 30, January 29,      May 1, January 30,
    (in CAD millions)               2011        2011        2010        2010
    -------------------------------------------------------------------------

    ASSETS
    Current assets
    Cash and cash equivalents  $   198.4   $   432.3   $   230.0   $   226.9
    Short-term investments             -           -     1,059.2     1,165.5
    Accounts receivable, net       131.1       144.0       134.6       132.9
    Income taxes recoverable         1.2         4.5        29.4         5.7
    Inventories                    981.7       953.2       915.8       852.3
    Prepaid expenses                39.4        31.8        34.4        34.8
    Derivative financial assets        -           -           -         9.9
    -------------------------------------------------------------------------
                                 1,351.8     1,565.8     2,403.4     2,428.0
    Non-current assets
    Property, plant & equipment    887.0       900.7       932.4       961.0
    Investment property             21.7        21.7        21.7        21.7
    Retirement benefit asset       193.1       197.4       205.8       207.4
    Intangible assets               23.6        23.5        22.9        22.6
    Goodwill                        11.2        11.2        11.2        11.2
    Investment in joint ventures   306.3       309.7       315.6       321.0
    Deferred income tax assets       0.7         0.5         0.5         0.6
    Other long-term assets          55.5        38.1        41.0        42.2
    -------------------------------------------------------------------------
                               $ 2,850.9   $ 3,068.6   $ 3,954.5   $ 4,015.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities
    Accounts payable and
     accrued liabilities       $   644.8   $   665.6   $   681.7   $   698.3
    Deferred revenue               230.2       224.0       246.5       235.9
    Provisions                      61.1        65.3        66.9        69.4
    Income and other taxes
     payable                        32.6        66.3        41.3        72.6
    Derivative financial
     liabilities                    17.1         3.0         4.0           -
    Principal payments on
     long-term obligations
     due within one year             5.7         4.7       305.1       305.4
    -------------------------------------------------------------------------
                                   991.5     1,028.9     1,345.5     1,381.6
    Non-current liabilities
    Long-term obligations           27.7       124.4        25.0        26.1
    Deferred revenue                77.0        77.4        69.2        67.5
    Retirement benefit liability   126.9       120.9       104.4        98.8
    Deferred income tax
     liabilities                    40.5        74.8        87.9        97.6
    Other long-term liabilities     91.4        84.7        90.9        93.5
    -------------------------------------------------------------------------
                                 1,355.0     1,511.1     1,722.9     1,765.1
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Capital stock                   15.4        15.4        15.7        15.7
    Retained earnings            1,494.5     1,544.9     2,218.9     2,227.7
    Accumulated other
     comprehensive (loss)
     income                        (14.0)       (2.8)       (3.0)        7.2
    -------------------------------------------------------------------------
                                 1,495.9     1,557.5     2,231.6     2,250.6
    -------------------------------------------------------------------------
                               $ 2,850.9   $ 3,068.6   $ 3,954.5   $ 4,015.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes are an integral part of these unaudited interim
    consolidated financial statements.



    SEARS CANADA INC.
    INTERIM CONSOLIDATED STATEMENTS OF NET LOSS
    AND COMPREHENSIVE LOSS
    For the 13-week period ended April 30, 2011 and May 1, 2010
    Unaudited

    (in CAD millions, except per share amounts)             2011        2010
    -------------------------------------------------------------------------

    Revenue                                            $   992.5   $ 1,068.2
    Cost of goods and services sold                        625.4       639.8
    -------------------------------------------------------------------------
    Gross profit                                           367.1       428.4
    -------------------------------------------------------------------------

    Selling, administrative and other expenses             421.3       427.9
    Finance costs                                            6.8         6.1
    Interest income                                         (0.6)       (0.7)
    Share of (income) loss in joint ventures                (1.9)        1.8
    -------------------------------------------------------------------------
    Loss before income taxes                               (58.5)       (6.7)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Income tax expense (recovery)
      Current                                               21.2         6.9
      Deferred                                             (30.2)       (4.8)
    -------------------------------------------------------------------------
                                                            (9.0)        2.1
    -------------------------------------------------------------------------
    Net loss                                           $   (49.5)  $    (8.8)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic net loss per share                           $   (0.47)  $   (0.08)
    Diluted net loss per share                         $   (0.47)  $   (0.08)

    Net loss                                           $   (49.5)  $    (8.8)
    Other comprehensive (loss) income, net of taxes:
      Mark-to-market adjustment related to short-term
       investments, net of income tax recovery of Nil
       (2010: $0.1)                                            -        (0.2)
      Loss on foreign exchange derivatives designated
       as cash flow hedges, net of income tax recovery
       of $4.6 (2010: $4.0)                                (12.2)       (8.7)
      Reclassification to net earnings of loss (gain)
       on foreign exchange derivatives designated as
       cash flow hedges, net of income tax recovery of
       $0.4 (2010: expense of $0.6)                          1.0        (1.3)
    -------------------------------------------------------------------------
    Other comprehensive loss                               (11.2)      (10.2)
    -------------------------------------------------------------------------
    Comprehensive loss                                 $   (60.7)  $   (19.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes are an integral part of these unaudited interim
    consolidated financial statements.



    SEARS CANADA INC.
    INTERIM CONSOLIDATED STATEMENTS OF CHANGES
    IN SHAREHOLDERS' EQUITY
    For the 13-week period ended April 30, 2011 and May 1, 2010
    Unaudited
                                          Accumulated
                                                other
                                        comprehensive                  Share-
                                 Capital        (loss)  Retained     holders'
    (in CAD millions)              stock       income   earnings      Equity
    -------------------------------------------------------------------------

    Balance as at
     January 29, 2011          $    15.4   $    (2.8)  $ 1,544.9   $ 1,557.5
    Net loss                           -           -       (49.5)      (49.5)
    Repurchase of common shares        -           -        (0.9)       (0.9)
    Other comprehensive loss           -       (11.2)          -       (11.2)
    -------------------------------------------------------------------------
    Balance as at April 30,
     2011                      $    15.4   $   (14.0)  $ 1,494.5   $ 1,495.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Balance as at January 30,
     2010                      $    15.7   $     7.2   $ 2,227.7   $ 2,250.6
    Net loss                           -           -        (8.8)       (8.8)
    Other comprehensive loss           -       (10.2)          -       (10.2)
    -------------------------------------------------------------------------
    Balance as at May 1, 2010  $    15.7   $    (3.0)  $ 2,218.9   $ 2,231.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes are an integral part of these unaudited interim
    consolidated financial statements.



    SEARS CANADA INC.
    INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the 13-week period ended April 30, 2011 and May 1, 2010
    Unaudited

    (in CAD millions)                                       2011        2010
    -------------------------------------------------------------------------
    Cash flow generated from
     (used for) operating
     activities
      Net loss                                         $   (49.5)  $    (8.8)
      Adjustments for:
        Depreciation and amortization                       28.6        34.5
        Finance costs                                        6.8         6.1
        Interest income                                     (0.6)       (0.7)
        Share of (income) loss from joint ventures          (1.9)        1.8
        Pension expenses                                    11.0         9.6
        Income tax expense (recovery)                       (9.0)        2.1
      Income taxes paid                                    (19.7)      (38.4)
      Interest paid                                         (0.1)       (0.3)
      Changes in non-cash working capital                  (40.5)      (92.8)
      Other                                                (38.1)       (6.7)
    -------------------------------------------------------------------------
                                                          (113.0)      (93.6)
    -------------------------------------------------------------------------
    Cash flow generated from (used for) investing
     activities
      Purchase of property, plant & equipment and
       intangible assets                                   (19.3)      (11.7)
      Proceeds from maturation of short-term investments       -       106.3
      Proceeds from sale of property, plant & equipment      0.3         0.2
      Dividends received from joint ventures                 6.7         3.1
    -------------------------------------------------------------------------
                                                           (12.3)       97.9
    -------------------------------------------------------------------------

    Cash flow generated from (used for) financing
     activities
      Interest paid on finance lease obligations            (0.6)       (0.6)
      Repayment of long-term obligations                  (110.8)       (1.4)
      Issuance of long-term obligations                      5.0           -
      Repurchase of common shares                           (0.9)          -
    -------------------------------------------------------------------------
                                                          (107.3)       (2.0)
    -------------------------------------------------------------------------

    Decrease (increase) in cash and cash
     equivalents                                       $  (232.6)  $     2.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Effect of exchange rate on cash and cash
     equivalents at end of period                           (1.3)        0.8

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash and cash equivalents at beginning of period   $   432.3   $   226.9
    Cash and cash equivalents at end of period         $   198.4   $   230.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes are an integral part of these unaudited interim
    consolidated financial statements.



    SEARS CANADA INC.
    RECONCILIATION OF NET LOSS TO EBITDA
    For the 13-week period ended April 30, 2011 and May 1, 2010
    Unaudited

    (in millions, except per share amounts)                 2011        2010
    -------------------------------------------------------------------------
    Net loss                                           $   (49.5)  $    (8.8)
    -------------------------------------------------------------------------
      Depreciation and amortization                         28.6        34.5
      Finance costs                                          6.8         6.1
      Interest income                                       (0.6)       (0.7)
      Income tax expense excluding operating adjustments    (9.0)        2.1
      Share of (income) loss in joint ventures              (1.9)        1.8
    -------------------------------------------------------------------------
    EBITDA                                             $   (25.6)  $    35.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Basic net loss per share                           $   (0.47)  $   (0.08)
    -------------------------------------------------------------------------
    >>

SEARS CANADA INC.

NOTES TO SELECTED INTERIM FINANCIAL INFORMATION

APRIL 30, 2011

Unaudited

1. BASIS OF PRESENTATION

This unaudited selected interim financial information of Sears Canada Inc. (the "Company") has been prepared in accordance with International Financial Reporting Standards ("IFRS"), including IAS 34, Interim Financial Reporting and IFRS 1, First-time Adoption of International Financial Reporting Standards ("IFRS 1").

2. IFRS 1 RECONCILIATIONS

IFRS 1 requires the reconciliation between Canadian Generally Accepted Accounting Principles ("GAAP") and IFRS equity and comprehensive income for the comparative fiscal 2010 period. These reconciliations are presented below:

2.1 Reconciliation of Canadian GAAP to IFRS 2010 Equity

    <<
                                               As at       As at       As at
                                          January 29,      May 1, January 30,
    (in CAD millions)                Ref        2011        2010        2010
    -------------------------------------------------------------------------
    Total equity under Canadian
     GAAP                                  $ 1,000.5   $ 1,654.1   $ 1,657.5

    Property, plant & equipment        a       375.8       391.7       400.4
    Investment property                a        16.6        16.6        16.6
    Joint ventures                     b       260.0       271.2       277.9
    Leases                             c        (0.3)        0.7         1.0
    Provisions                         e        (0.6)       (0.8)       (0.9)
    Employee benefits                  f        97.4       103.7       105.8
    Intangible assets                  g       (33.7)      (38.8)      (33.7)
    Loyalty program                    h       (17.1)      (18.2)      (19.7)
    -------------------------------------------------------------------------
    Total IFRS adjustments before
     tax                                       698.1       726.1       747.4
    -------------------------------------------------------------------------
    Income tax                         i      (141.1)     (148.6)     (154.3)
    -------------------------------------------------------------------------
    Total adjustment to equity                 557.0       577.5       593.1
    -------------------------------------------------------------------------
    Total equity under IFRS                  1,557.5     2,231.6     2,250.6
    -------------------------------------------------------------------------
    >>

2.2 Reconciliation of Canadian GAAP to IFRS 2010 Comprehensive Income (Loss)

    <<
                                                         52-Week     13-Week
                                                          Period      Period
                                                           Ended       Ended
                                                      January 29,      May 1,
    (in CAD millions)                            Ref        2011        2010
    -------------------------------------------------------------------------
    Net earnings under Canadian GAAP                   $   149.8   $     7.2

    Property, plant & equipment                    a       (24.6)       (8.7)
    Joint ventures                                 b       (17.6)       (6.7)
    Leases                                         c        (1.3)       (0.3)
    Financial instruments                          d        (0.4)       (0.5)
    Provisions                                     e         0.3         0.1
    Employee benefits                              f        (8.4)       (2.1)
    Intangible assets                              g           -        (5.1)
    Loyalty program                                h         2.6         1.5
    -------------------------------------------------------------------------
    Total IFRS adjustments before tax                      (49.4)      (21.8)
    -------------------------------------------------------------------------
    Income tax                                     i        12.9         5.8
    -------------------------------------------------------------------------
    Net earnings (loss) under IFRS                     $   113.3   $    (8.8)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Other comprehensive loss under Canadian GAAP           (10.4)      (10.6)
    -------------------------------------------------------------------------
    Financial instruments                          d         0.4         0.4
    -------------------------------------------------------------------------
    Other comprehensive loss under IFRS                    (10.0)      (10.2)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Comprehensive income (loss) under IFRS             $   103.3   $   (19.0)
    -------------------------------------------------------------------------
    >>

2.3 Explanation of significant IFRS adjustments to equity and comprehensive income

The following is an explanation of the adjustments disclosed in the reconciliations in Note 2.1 to 2.2:

    <<
    (a) Property, plant & equipment and investment property: On transition,
        the Company elected to measure its land and buildings at fair value
        and set the fair value as the deemed cost at that date in accordance
        with the IFRS 1 fair value as deemed cost election option. As a
        result, the cost of the Company's property, plant & equipment and its
        investment property increased materially on transition. Due to the
        increased building cost, subsequent building depreciation also
        increased. The adjustment made to equity represents the increase to
        the cost of the land and buildings. The adjustment to net earnings
        represents the increase in depreciation in the period due to the
        increased building cost.

        Investment property has been recognized at fair value at the date of
        transition. Under Canadian GAAP, investment property was measured on
        a depreciated cost basis and classified as property, plant &
        equipment. For the period ending January 30, 2010, the carrying
        amount and fair value of investment property was $5.1 million and
        $21.7 million, respectively. The total revaluation of investment
        property was $16.6 million. The carrying amount of investment
        property as at January 29, 2011 approximates fair value.

        The adjustment to fair value for property, plant & equipment and
        investment property was based on 3rd party valuations, performed
        using various valuation methods.

    (b) Joint ventures: The Company selected the equity method to account for
        its joint ventures. As such, the difference between the end of the
        reporting periods of the joint ventures and that of the Company can
        be no more than three months. As a result, the Company has advanced
        the joint venture reporting periods used in applying the equity
        method of accounting. In addition, on transition, the Company elected
        to measure its investments in the joint venture land and buildings at
        fair value and set the fair value as deemed cost at that date in
        accordance with the IFRS 1 fair value as deemed cost election option.
        The adjustment to equity is the result of the advancement of the
        joint venture reporting periods and the increase to the cost of the
        land and buildings is due to the application of the IFRS 1 election.
        The adjustment to net earnings represents the increased depreciation
        in the period due to the increase made to the joint venture buildings
        cost.

    (c) Leases: There are minor differences in the criteria used to evaluate
        whether a lease including a land and building component is a finance
        lease, between IAS 17, Leases, and the Canadian GAAP equivalent. As a
        result of these differences, a number of leases classified as
        operating leases under Canadian GAAP were reclassified as finance
        leases under IFRS. In addition, on transition, the Company elected to
        measure certain of its finance leased assets at fair value and set
        the fair value as deemed cost at that date in accordance with the
        IFRS 1 fair value as deemed cost election option. The adjustment to
        equity results from the reclassification of these leases to finance
        leases and the IFRS 1 fair value as deemed cost election. The
        adjustment to net earnings represents the difference between the
        depreciation and interest expense under IFRS and the rental expense
        recognized under Canadian GAAP for the leases classified as finance
        leases under IFRS.

    (d) Financial instruments: The Company holds foreign exchange option
        contracts. Under Canadian GAAP, these derivatives were fully
        designated for hedge accounting. Under IAS 39, Financial Instruments,
        only the intrinsic portion of these contracts can be designated for
        hedge accounting. As a result, changes in the value of the
        undesignated component of these derivatives are required to be
        recognized in the Consolidated Statements of Earnings and
        Comprehensive Income. The adjustment to retained earnings represents
        the recognition of the value of the undesignated portion of the
        outstanding derivatives. The adjustment to net earnings represents
        the recognition of the change in fair value of the undesignated
        portion of the outstanding derivatives in the period.

    (e) Provisions: IAS 37, Provisions, contingent liabilities and contingent
        assets, requires onerous contracts to be recognized as liabilities.
        The Company has onerous contracts relating to leased space that is
        not fully occupied by a company store or a subtenant. The adjustment
        to equity reduces equity by the outstanding onerous contract
        liabilities. The adjustment to net earnings represents the unwinding
        of the onerous contract liabilities recorded on transition.

    (f) Employee benefits: The Company has selected the corridor method to
        recognize actuarial gains and losses on its defined benefit plans
        under IAS 19, Employee Benefits. This selection requires the Company
        to apply the corridor method retrospectively to each plan's inception
        date. Equity is increased due to adjusted plan asset and obligation
        values resulting from the retrospective application of IAS 19. The
        adjustment to net earnings represents the change required to the
        pension expense resulting from the application of the corridor
        approach under IAS 19.

    (g) Intangible assets: Under IAS 38, Intangible Assets, costs related to
        internally generated intangible assets may only be capitalized if
        they meet specific criteria. The adjustments to equity represent the
        recognition of expenses that had been deferred under Canadian GAAP
        that do not meet the criteria of intangible assets under IFRS. The
        adjustment to net earnings represents the recognition of expenses
        incurred in the period that were deferred under Canadian GAAP.

    (h) Loyalty Program: Under Canadian GAAP, loyalty points granted under
        the Sears Club program were expensed at issuance. Under IFRIC 13,
        Customer Loyalty Programs, the fair value of the consideration
        received or receivable at the initial sale is allocated between the
        merchandise sold and the Sears Club points granted. Revenue related
        to the fair value of the points granted is deferred at the time of
        the initial sale transaction and is recognized when the points have
        been redeemed and the Company's obligations have been fulfilled. The
        adjustment to equity as well as net earnings reflects the difference
        between the policy followed under Canadian GAAP and the policy
        required by IFRIC 13.

    (i) Income Tax: Under Canadian GAAP and IFRS, deferred income tax assets
        and liabilities are recorded for temporary differences, which are the
        differences between when an amount is recognized for accounting
        purposes and when the amount is recognized for tax purposes. The
        adjustment to equity as well as net earnings reflects changes to
        temporary differences, and thus the deferred income tax assets and
        liabilities, required by adjustments (a) to (h) listed above.
    >>

SOURCE Sears Canada Inc.

For further information: Media Relations Contact: Eliana Cugini, Sears Canada Inc., 416-941-4426, ecugini@sears.ca


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