Sears Canada Reports Fourth Quarter Earnings and Full-Year Results

TORONTO, Feb. 23 /CNW/ - Sears Canada Inc. (TSX: SCC) today announced its unaudited fourth quarter and full-year results. Total revenues for the 13-week period ended January 29, 2011 were $1.477 billion versus $1.525 billion for the comparable 13-week period ended January 30, 2010, a decrease of 3.2%. Same store sales decreased 3.3%.

Operating EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the same 13-week period was $147.1 million versus $222.9 million last year. Operating net earnings were $78.2 million or 74 cents per share versus $126.9 million or $1.18 per share in the fourth quarter of 2009.

There was a non-operating post-tax gain of $11.4 million for the sale of unused land in Burnaby, British Columbia as mentioned in the Company's third quarter report and a non-operating post-tax gain of $2.6 million from the sale of unused land in Lachenaie, Quebec. In the same quarter last year, there was a non-operating post-tax gain of $1.3 million representing the sale of a joint venture in Sorel, Quebec. Net earnings for the quarter ending January 29, 2011 were $92.2 million or 87 cents per share versus $128.2 million or $1.19 per share in the quarter ending January 30, 2010.

Total revenues for the 52-week period ended January 29, 2011 were $4.958 billion versus $5.201 billion for the 52-week period ended January 30, 2010, a decrease of 4.7%. Same store sales decreased 4.0%. Operating EBITDA for the same 52-week period was $321.7 million versus $497.6 million last year. Operating net earnings for the year were $135.8 million or $1.27 per share versus $239.9 million or $2.23 per share for the prior year. Non-operating activities for this year and last year include those taken in the fourth quarter described earlier in this release in addition to a post-tax restructuring charge of $6.5 million taken in the first quarter of 2009. Net earnings for the year ending January 29, 2011 were $149.8 million or $1.40 per share versus $234.7 million or $2.18 per share for the year ending January 30, 2010.

Operating EBITDA and Operating net earnings are non-GAAP measures; please refer to the "Reconciliation of Net Earnings to Operating EBITDA" table attached.

Dividends totalling $753.4 million, or $7.50 per share at time of distribution, were paid to shareholders during 2010. Cash, restricted cash and investments were $441.3 million as at January 29, 2011. Total debt was $136.1 million as at January 29, 2011 compared to $350.7 million as at January 30, 2010.

Commenting on the quarter and full year performance, Dene Rogers, President and Chief Executive Officer, Sears Canada Inc., said, "The 2010 results were disappointing due to several external factors including increasing household debt, at an all time high, which affects sales in major expense items such as appliances, the effect of a warm fall that impacted apparel and categories such as snowblowers, and continued deep discounting by the industry in general. Nevertheless, we take responsibility for our results and are committed to improving our performance in 2011.

"I would like to thank the thousands of hard working and dedicated Sears associates who share our commitment to serve our customers and achieve the profitability consistent with our position as a leading Canadian retailer."

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 of 196 corporate stores, 287 hometown dealer stores, 33 home improvement showrooms, over 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.
    CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
    For the 13 and 52-week periods ended January 29, 2011 and January 30,
    2010

    Unaudited (Except for fiscal 2009 which is audited)

                                     Fourth Quarter           Fiscal Year
                               ----------------------  ----------------------
    (in millions, except per
     share amounts)                 2010        2009        2010        2009
    -------------------------------------------------------------------------
    Total revenues             $ 1,476.8   $ 1,525.1   $ 4,957.8   $ 5,200.6
    -------------------------------------------------------------------------
    Cost of merchandise sold,
     operating, administrative
     and selling expenses        1,329.7     1,302.2     4,636.1     4,712.3
    Depreciation and
     amortization                   29.9        30.3       104.6       117.4
    Interest expense, net            3.1         7.2        13.5        25.2
    Unusual gains                  (16.2)       (1.9)      (16.2)       (1.9)
    -------------------------------------------------------------------------
    Earnings before income
     taxes                         130.3       187.3       219.8       347.6
    -------------------------------------------------------------------------
    Income taxes expense
     (recovery)
      Current                       40.0        49.1        75.4       109.4
      Future                        (1.9)       10.0        (5.4)        3.5
    -------------------------------------------------------------------------
                                    38.1        59.1        70.0       112.9
    -------------------------------------------------------------------------
    Net earnings               $    92.2   $   128.2   $   149.8   $   234.7
    -------------------------------------------------------------------------
    Net earnings per share     $    0.87   $    1.19   $    1.40   $    2.18
    -------------------------------------------------------------------------
    Diluted net earnings per
     share                     $    0.87   $    1.19   $    1.40   $    2.18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings               $    92.2   $   128.2   $   149.8   $   234.7
    Other comprehensive income
     (loss), net of taxes:
      Mark-to-market adjustment
       related to short-term
       investments, net of
       income taxes recovery
       of less than $0.1 and
       less than $0.1 (2009:
       expense of less than
       $0.1 and less than
       $0.1)                           -         0.1        (0.2)        0.1
      Gain (loss) on foreign
       exchange derivatives
       designated as cash
       flow hedges, net of
       income taxes recovery
       of $2.1 and $3.6 (2009:
       expense of $0.2 and
       recovery of $14.6)           (4.7)        0.4        (7.8)      (31.7)
      Reclassification to net
       earnings of gain on
       foreign exchange
       derivatives designated
       as cash flow hedges,
       net of income taxes
       recovery of $0.1 and
       expense of $1.0 (2009:
       expense of $1.8 and $13.3)      -        (3.9)       (2.4)      (28.8)
      Loss on fuel derivatives
       designated as cash flow
       hedges, net of income
       taxes recovery of Nil
       and Nil (2009: less
       than $0.1 and Nil)              -        (0.2)          -           -
    -------------------------------------------------------------------------
    Other comprehensive loss        (4.7)       (3.6)      (10.4)      (60.4)
    -------------------------------------------------------------------------
    Comprehensive income       $    87.5   $   124.6   $   139.4   $   174.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
     AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
    For the 13 and 52-week periods ended January 29, 2011 and January 30,
    2010

    Unaudited (Except for fiscal 2009 which is audited)

                                     Fourth Quarter           Fiscal Year
                               ----------------------  ----------------------
    (in millions)                   2010        2009        2010        2009
    -------------------------------------------------------------------------
    Retained earnings
    Opening balance            $   933.2   $ 1,505.6   $ 1,633.8   $ 1,399.1
    Dividends declared                 -           -      (753.4)          -
    Repurchase of common
     shares                        (37.9)          -       (42.7)          -
    Net earnings                    92.2       128.2       149.8       234.7
    -------------------------------------------------------------------------

    Closing balance            $   987.5   $ 1,633.8   $   987.5   $ 1,633.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive income
     (loss)
    Opening balance            $     2.3   $    11.6   $     8.0   $    68.4
    Other comprehensive
     loss                           (4.7)       (3.6)      (10.4)      (60.4)
    -------------------------------------------------------------------------

    Closing balance            $    (2.4)  $     8.0   $    (2.4)  $     8.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings and
     accumulated other
     comprehensive income
     (loss)                    $   985.1   $ 1,641.8   $   985.1   $ 1,641.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    SEARS CANADA INC.
    RECONCILIATION OF NET EARNINGS TO OPERATING EBITDA
    Unaudited

                                   Fourth Quarter(1)        Year-to-Date(1)
                               ----------------------------------------------
    (in millions, except per
     share amounts)                 2010        2009        2010        2009
    -------------------------------------------------------------------------
    Net earnings               $    92.2   $   128.2   $   149.8   $   234.7
    -------------------------------------------------------------------------
    Non-operating activities,
     net of taxes
      Restructuring expense            -           -           -         6.5
      Unusual gains(2)             (14.0)       (1.3)      (14.0)       (1.3)
    -------------------------------------------------------------------------
    Operating net earnings(3)  $    78.2   $   126.9   $   135.8   $   239.9
    -------------------------------------------------------------------------
    Depreciation and
     amortization                   29.9        30.3       104.6       117.4
    Interest expense, net            3.1         7.2        13.5        25.2
    Income taxes expense
     excluding operating
     adjustments                    35.9        58.5        67.8       115.1
    -------------------------------------------------------------------------
    Operating EBITDA(3)        $   147.1   $   222.9   $   321.7   $   497.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings per share     $    0.87   $    1.19   $    1.40   $    2.18
    Operating net earnings
     per share                 $    0.74   $    1.18   $    1.27   $    2.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) The fourth quarter and year-to-date ("YTD") periods of 2010 and 2009
        represent the 13 and 52-week periods ended January 29, 2011
        and January 30, 2010, respectively.
    (2) Unusual gains in 2010 represent the sale of real estate property
    (3) Operating net earnings and Operating EBITDA are non-GAAP measures
        which exclude non-operating gains and losses and are used by
        management to better assess the Company's underlying performance.



    SEARS CANADA INC.
    CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

    Unaudited (Except for fiscal 2009 which is audited)

                                                         As at         As at
                                                    January 29,   January 30,
    (in millions)                                         2011          2010
    -------------------------------------------------------------------------
    ASSETS

    Current Assets
    Cash and short-term investments                  $   426.0     $ 1,381.8
    Restricted cash and investments                       15.3          15.8
    Accounts receivable                                  143.2         131.1
    Income taxes recoverable                               4.5           6.0
    Inventories                                          953.2         852.3
    Prepaid expenses and other assets                     61.7          74.7
    Current portion of future income tax assets           30.6          29.7
    -------------------------------------------------------------------------
                                                       1,634.5       2,491.4

    Capital assets                                       577.4         620.2
    Deferred charges                                     172.9         179.2
    Intangible assets                                     23.5          22.6
    Goodwill                                              11.2          11.2
    Future income tax assets                              41.8          32.0
    Other long-term assets                                48.5          48.2
    -------------------------------------------------------------------------
                                                     $ 2,509.8     $ 3,404.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES

    Current Liabilities
    Accounts payable                                 $   625.4     $   647.7
    Accrued liabilities                                  326.5         342.1
    Income and other taxes payable                        66.5          72.7
    Principal payments on long-term obligations
     due within one year                                   5.5         314.2
    -------------------------------------------------------------------------
                                                       1,023.9       1,376.7

    Long-term obligations                                130.6          36.5
    Accrued benefit liabilities                          186.2         167.7
    Future income tax liabilities                          5.5           4.3
    Other long-term liabilities                          163.1         162.1
    -------------------------------------------------------------------------
                                                       1,509.3       1,747.3
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Capital stock                                         15.4          15.7
    Retained earnings                                    987.5       1,633.8
    Accumulated other comprehensive income (loss)         (2.4)          8.0
    -------------------------------------------------------------------------
                                                       1,000.5       1,657.5
    -------------------------------------------------------------------------
                                                     $ 2,509.8     $ 3,404.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    SEARS CANADA INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the 13 and 52-week periods ended January 29, 2011 and January 30,
    2010

    Unaudited (Except for fiscal 2009 which is audited)

                                     Fourth Quarter           Fiscal Year
                               ----------------------  ----------------------
    (in millions)                   2010        2009        2010        2009
    -------------------------------------------------------------------------
    Cash flow generated from
     (used for) operating
     activities
      Net earnings             $    92.2   $   128.2   $   149.8   $   234.7
      Non-cash items included
       in net earnings,
       principally depreciation,
       pension expense, future
       income taxes and gain on
       sale of real estate and
       real estate joint
       ventures                     15.6        40.5       110.0       135.4
      Changes in non-cash
       working capital balances
       related to operations        57.0       139.4      (154.4)      135.7
      Other, principally
       pension contributions
       and changes to long-term
       assets and liabilities       (1.6)       (2.6)       (7.0)       (9.7)
    -------------------------------------------------------------------------
                                   163.2       305.5        98.4       496.1
    -------------------------------------------------------------------------
    Cash flow generated from
     (used for) investing
     activities
      Purchases of capital and
       intangible assets           (26.1)      (20.6)      (62.4)      (65.7)
      Proceeds from sale of
       capital assets and
       joint venture                18.3         5.0        18.7         6.0
      Investment in note
       receivable                  401.0           -           -           -
      Changes in restricted cash
       and investments               0.6        52.7         0.5       135.9
    -------------------------------------------------------------------------
                                   393.8        37.1       (43.2)       76.2
    -------------------------------------------------------------------------
    Cash flow generated from
     (used for) financing
     activities
      Repayment of long-term
       obligations                (376.5)       (6.0)     (687.0)      (10.3)
      Issuance of long-term
       obligations                     -           -       472.4           -
      Repurchase of common
       shares                      (38.2)          -       (43.0)          -
      Dividend payments                -           -      (753.4)          -
    -------------------------------------------------------------------------
                                  (414.7)       (6.0)   (1,011.0)      (10.3)
    -------------------------------------------------------------------------

    Increase (decrease) in
     cash and short-term
     investments                   142.3       336.6      (955.8)      562.0
    Cash and short-term
     investments at
     beginning of period           283.7     1,045.2     1,381.8       819.8
    -------------------------------------------------------------------------
    Cash and short-term
     investments at end of
     period                    $   426.0   $ 1,381.8   $   426.0   $ 1,381.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash at end of period      $    55.3   $    56.5   $    55.3   $    56.5
    Short-term investments
     at end of period              370.7     1,325.3       370.7     1,325.3
    -------------------------------------------------------------------------
    Total cash and short-term
     investments at end of
     period                    $   426.0   $ 1,381.8   $   426.0   $ 1,381.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

SOURCE Sears Canada Inc.

For further information: Media Relations Contact: Vincent Power, Sears Canada Inc., 416-941-4422, vpower@sears.ca


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