Sears Canada Reports Fourth Quarter Earnings and Full-Year Results



    TORONTO, Feb. 25 /CNW/ - Sears Canada Inc. (TSX: SCC) today announced its
unaudited fourth quarter and full-year results. Total revenues for the 52-week
period ended January 31, 2009 were $5.733 billion versus $5.845 billion for
the comparable 52-week period ended February 2, 2008, a decrease of 1.9%. Same
store sales decreased 1.6% compared to the same period last year. Operating
EBITDA, before unusual items, was $517.0 million versus $521.6 million, a
decrease of 0.9%. Net earnings, including unusual items, for the 52-week
period ended January 31, 2009 decreased 5.1% to $288.6 million or $2.68 per
share versus $304.2 million or $2.83 per share for the comparable period ended
February 2, 2008.
    Total revenues for the 13-week period ended January 31, 2009 were $1.616
billion versus $1.715 billion for the comparable 13-week period ended February
2, 2008, a decrease of 5.8%. Same store sales decreased by 6.2% compared to
the comparable period last year. Operating EBITDA, before unusual items, was
$179.9 million versus $218.7 million in the comparable period of last year, a
decrease of 17.7%. Net earnings, including unusual items, for this period
decreased 19.7% to $95.5 million or 89 cents per share versus $119.0 million
or $1.11 per share for the comparable period last year.
    Cash, restricted cash and investments increased by $87.8 million in 2008
to a total of $964.6 million as at January 31, 2009. Cash flow generated from
operations totalled $165.9 million in 2008.
    Commenting on the quarter and full year performance, Dene Rogers,
President and Chief Executive Officer, Sears Canada Inc., said, "Operating
EBITDA before unusual items at the end of the third quarter was up 11.3%
versus the prior year. As consumer confidence began to slump in October, our
sales were impacted. Nevertheless, we have had a solid year, with a minor
decrease of Operating EBITDA of 0.9%. We are implementing new customer offers
which are planned to meet the effect of the current economy and the lowest
consumer confidence levels in almost three decades. These new offers include
promotional offers to demonstrate to our customers the exceptional value Sears
has to offer, such as our popular "Budget Relief Price Drop" program which we
launched in the fall of 2008 and which has resonated favourably with customers
coast to coast."
    Mr. Rogers continued, "Most importantly, I want to thank our 35,000
associates who have worked hard to adjust to the current economy, and who
continue to improve our customers' lives by providing quality services,
products and solutions that earn their trust and build lifetime
relationships."
    The Company had previously announced a change in its fiscal year end from
the Saturday closest to the end of December to the Saturday closest to the end
of January. The 2008 fiscal year, which ended on January 31, 2009, was the
first full year using the new fiscal calendar. The previous fiscal year (2007)
which ended on February 2, 2008, was a 57-week year with an 18-week fourth
quarter in order to adjust to the new calendar. The following chart provides
financial indicators for 2008 versus the comparable number of weeks for the
quarter and full year of 2007 (as reported above) as well as for the 18-week
quarter and 57-week full year of 2007.

    
    -------------------------------------------------------------------------
                       13 Weeks       13 Weeks       52 Weeks       52 Weeks
                          Ended          Ended          Ended          Ended
                        Jan. 31,       Jan. 31,       Jan. 31,       Jan. 31,
                       2009 vs.       2009 vs.       2009 vs.       2009 vs.
                       13 Weeks       18 Weeks       52 Weeks       57 Weeks
    Financial             Ended          Ended          Ended          Ended
    Indicators     Feb. 2, 2008   Feb. 2, 2008   Feb. 2, 2008   Feb. 2, 2008
    -------------------------------------------------------------------------
    Revenues              -5.8%         -29.6%          -1.9%          -9.4%
    -------------------------------------------------------------------------
    Same Store Sales      -6.2%            N/A          -1.6%            N/A
    -------------------------------------------------------------------------
    Operating
     EBITDA(1)           -17.7%         -33.3%          -0.9%          -4.0%
    -------------------------------------------------------------------------
    Net Earnings
     Incl. Unusual
     Items               -19.7%         -34.3%          -5.1%          -5.7%
    -------------------------------------------------------------------------
    (1) Non-GAAP measure. Please refer to Section 1.f.i. of Management's
        Discussion and Analysis contained in the 2007 Annual Report.
        Operating EBITDA is equal to Net Earnings Before Interest, Income
        Taxes, Depreciation, Amortization and Unusual Items.
    

    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 impact of the sale of the Company's Credit and Financial
Services operations and 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 198 corporate
stores, 187 dealer stores, 44 home improvement showrooms, over 1,850 catalogue
merchandise pick-up locations, 106 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 31, 2009 and
    the 18 and 57-week periods ended February 2, 2008
    Unaudited

                                   Fourth Quarter           Fiscal Year
    (in millions, except      ----------------------- -----------------------
     per share amounts)             2008        2007        2008        2007
    -------------------------------------------------------------------------
    Total revenues             $ 1,616.3   $ 2,295.8   $ 5,733.2   $ 6,326.4
    -------------------------------------------------------------------------
    Cost of merchandise sold,
     operating, administrative
     and selling expenses        1,436.4     2,025.9     5,216.2     5,787.6
    Depreciation and
     amortization                   31.4        43.0       126.9       150.1
    Interest expense
     (recovery), net                 4.5        (1.7)       10.0        12.7
    Unusual items - (gain)
     expense                           -         4.2       (38.8)      (82.2)
    -------------------------------------------------------------------------
    Earnings before income
     taxes                         144.0       224.4       418.9       458.2
    -------------------------------------------------------------------------
    Income taxes expense
     (recovery)
      Current                       53.7        37.7       161.3        74.4
      Future                        (5.2)       41.3       (31.0)       77.8
    -------------------------------------------------------------------------
                                    48.5        79.0       130.3       152.2
    -------------------------------------------------------------------------
    Net earnings               $    95.5   $   145.4   $   288.6   $   306.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per share     $    0.89   $    1.35   $    2.68   $    2.84
    -------------------------------------------------------------------------
    Diluted net earnings per
     share                     $    0.89   $    1.35   $    2.68   $    2.84
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Net earnings               $    95.5   $   145.4   $   288.6   $   306.0

    Other comprehensive income
     (loss), net of taxes:
      Mark-to-market adjustment
       related to short-term
       investments, net of
       income taxes expense of
       $0.1 and of less than
       $0.1 (2007: $0.1 and
       Nil), respectively.           0.2         0.2         0.1           -
      Gain on derivatives
       designated as cash flow
       hedges, net of income
       taxes expense of $3.7
       and $35.4                     9.8           -        76.6           -
      Reclassification to net
       earnings of loss on
       derivatives designated
       as cash flow hedges,
       net of income taxes
       recovery of $3.5 and
       $3.8                         (7.6)          -        (8.3)          -
    -------------------------------------------------------------------------
    Other comprehensive income       2.4         0.2        68.4           -
    -------------------------------------------------------------------------
    Comprehensive income       $    97.9   $   145.6   $   357.0   $   306.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                   Fourth Quarter          Year-to-Date
    (in millions, except      -----------------------------------------------
     per share amounts)             2008        2007        2008        2007
    -------------------------------------------------------------------------
    Net earnings(1)            $    95.5   $   145.4   $   288.6   $   306.0
    -------------------------------------------------------------------------
    Unusual items, net of
     taxes:
      Restructuring activities         -        (0.2)       (1.1)       (0.2)
      Sale of real estate/
       joint venture                   -           -       (28.3)      (67.3)
      Sale of airplane                 -           -           -        (2.3)
      Settlement of lawsuit            -           -           -         2.4
      Environmental
       remediation                     -         2.9           -         2.9
    -------------------------------------------------------------------------
    Net earnings excluding
     unusual items(1)          $    95.5   $   148.1   $   259.2   $   241.5
    -------------------------------------------------------------------------
    Depreciation and
     amortization                   31.4        43.0       126.9       150.1
    Interest expense, net            4.5        (1.7)       10.0        12.7
    Income taxes expense
     excluding taxes on
     unusual items(1)               48.5        80.5       120.9       134.5
    -------------------------------------------------------------------------

    Operating EBITDA(2)        $   179.9   $   269.9   $   517.0   $   538.8
    -------------------------------------------------------------------------

    Adjustments to arrive at
     comparable period
     operating EBITDA(3) for
     2007:
      Change in fiscal year end                (47.0)                  (26.9)
      New inventory standard                     6.5                     5.9
      Retrospective change in
       financial instruments
       accounting policy                       (10.7)                    3.8
    -------------------------------------------------------------------------
    Comparable period
     operating EBITDA(3)       $   179.9   $   218.7   $   517.0   $   521.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net earnings per share     $    0.89   $    1.35   $    2.68   $    2.84
    Net earnings per share
     excluding unusual items   $    0.89   $    1.38   $    2.41   $    2.25
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Net earnings and income taxes expense for the fourth quarter and
        year-to-date ("YTD") 2007 have been restated as a result of the
        retrospective application of the change to the Company's financial
        instruments accounting policy choice regarding recognition.
    (2) The fourth quarter and YTD periods of 2008 and 2007 represent the
        13 and 52-week periods ended January 31, 2009 and 18 and 57-week
        periods ended February 2, 2008, respectively.
    (3) For the fourth quarter and YTD 2008 and the comparable fourth quarter
        and YTD 2007, comparable period operating EBITDA represents the
        13 and 52-week periods ended January 31, 2009 and 13 and 52-week
        periods ended February 2, 2008, respectively.



    SEARS CANADA INC.
    CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

    Unaudited

                                                         As at         As at
                                                    January 31,   February 2,
    (in millions)                                         2009          2008
    -------------------------------------------------------------------------

    ASSETS
    Current Assets
    Cash and short-term investments                  $   819.8     $   871.6
    Restricted cash and investments(1)                   144.8           5.2
    Accounts receivable                                  138.7         118.4
    Income taxes recoverable                              16.6           0.4
    Inventories(2)                                       968.3         879.7
    Prepaid expenses and other assets(3)                 182.5          91.1
    Current portion of future income tax assets            0.3          29.2
    -------------------------------------------------------------------------
                                                       2,271.0       1,995.6

    Capital assets                                       712.8         742.0
    Deferred charges                                     198.1         205.0
    Future income tax assets                              27.9          24.9
    Other long-term assets(1)                             54.9          34.2
    -------------------------------------------------------------------------
                                                     $ 3,264.7     $ 3,001.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current Liabilities
    Accounts payable                                 $   640.9     $   683.6
    Accrued liabilities                                  383.6         438.6
    Income and other taxes payable                        39.4          80.2
    Principal payments on long-term obligations due
     within one year                                      14.2          16.1
    Future income tax liabilities                          2.5             -
    -------------------------------------------------------------------------
                                                       1,080.6       1,218.5

    Long-term obligations(4)                             350.4         356.0
    Accrued benefit liability                            158.5         164.1
    Other long-term liabilities                          167.1         169.7
    -------------------------------------------------------------------------
                                                       1,756.6       1,908.3
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Capital stock                                         15.7          15.7
    Retained earnings                                  1,424.0       1,077.7
    Accumulated other comprehensive income                68.4             -
    -------------------------------------------------------------------------
                                                       1,508.1       1,093.4
    -------------------------------------------------------------------------
                                                     $ 3,264.7     $ 3,001.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) As at January 31, 2009, the Company had $144.8 million (2007:
        $5.2 million) of restricted cash and investments recorded as current
        assets and $6.9 million of restricted cash deposits recorded in other
        long-term assets. These balances represent cash and investments
        pledged as collateral for letters of credit obligations issued under
        the Company's offshore merchandise purchasing program (Footnote 4) of
        $110.4 million (2007: Nil), current and long-term cash deposits
        pledged as collateral with counterparties related to outstanding
        derivative contracts of $28.8 million (2007: Nil) and $6.9 million
        (2007: Nil) respectively, and funds held in trust in accordance with
        regulatory requirements governing advance ticket sales related to
        Sears Travel of $5.6 million (2007: $5.2 million).

        Cash and investments are considered to be restricted when it is
        subject to contingent rights of a third party customer, vendor, or
        government agency.

    (2) On February 3, 2008, the Company adopted CICA Handbook Section 3031
        "Inventories". The new standard applies to interim and annual
        financial statements relating to fiscal years beginning on or after
        January 1, 2008 and provides guidance on the determination of cost
        and requires inventories to be measured at the lower of cost and net
        realizable value. The Company has adopted the new standard
        retrospectively, without restatement of prior period amounts. The
        initial impact of measuring inventories under the new standard is an
        increase to the carrying amount of opening inventories as at
        February 3, 2008 of $85.4 million. Opening retained earnings has been
        adjusted by $57.7 million, equal to the change in opening inventories
        net of taxes of $27.7 million.

    (3) When advantageous to do so, the Company enters into foreign exchange
        contracts to reduce the foreign exchange risk with respect to U.S.
        dollar denominated assets, liabilities, goods or services. As at
        January 31, 2009, there were foreign exchange contracts outstanding
        with a notional value of U.S. $547.4 million and a combined carrying
        value of $91.0 million (2007: $4.2 million), included in prepaid
        expenses and other assets. These contracts have settlement dates
        extending to August 2010. While the notional principal amounts of
        these outstanding financial instruments are not recorded on the
        consolidated statements of financial position, the fair value of the
        contracts noted above are included in prepaid expenses and other
        assets. Changes in fair value of those contracts designated as hedges
        are included in other comprehensive income for cash flow hedges to
        the extent the hedges continue to be effective.

    (4) The secured three year revolving $200.0 million credit facility
        expired in December 2008. As a result, the assets of the Company
        which had been pledged as security for the facility were released and
        the outstanding medium term notes are unsecured. The Company is no
        longer subject to any financial covenants. The revolving facility had
        been solely used to support the Company's offshore merchandise
        purchasing program and was replaced by a U.S. $120.0 million letter
        of credit facility.



    SEARS CANADA INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the 13 and 52-week periods ended January 31, 2009 and
    the 18 and 57-week periods ended February 2, 2008

    Unaudited
                                   Fourth Quarter           Fiscal Year
                              ----------------------- -----------------------
    (in millions)                   2008        2007        2008        2007
    -------------------------------------------------------------------------
    Cash flow generated from
     (used for) operating
     activities
      Net earnings             $    95.5   $   145.4   $   288.6   $   306.0
      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                     38.5        78.0        89.9       172.7
      Changes in non-cash
       working capital balances
       related to operations        62.6        52.2      (194.8)     (236.2)
      Other, principally pension
       contributions and changes
       to long-term assets and
       liabilities                  (1.0)       (3.6)      (17.8)      (17.2)
    -------------------------------------------------------------------------
                                   195.6       272.0       165.9       225.3
    -------------------------------------------------------------------------

    Cash flow generated from
     (used for) investing
     activities
      Purchases of capital
       assets                      (29.9)       (5.7)      (96.6)      (54.6)
      Proceeds from sale of
       capital assets                0.2         0.7        40.4       104.4
      Deferred charges                 -        (0.6)       (0.5)       (0.7)
      Changes in restricted
       cash and investments
       (Current and Long-term)    (145.8)       (0.1)     (146.5)        4.9
      Acquisition, net of cash
       acquired                        -           -        (7.0)          -
      Purchases of investments         -           -           -        (3.0)
      Proceeds on sale of real
       estate joint ventures,
       net of cash sold                -           -           -         5.2
    -------------------------------------------------------------------------
                                  (175.5)       (5.7)     (210.2)       56.2
    -------------------------------------------------------------------------

    Cash flow used for
     financing activities
      Repayment of long-term
       obligations                  (3.8)     (130.7)       (7.5)     (132.8)
    -------------------------------------------------------------------------

    Increase (decrease) in
     cash and short-term
     investments                    16.3       135.6       (51.8)      148.7
    Cash and short-term
     investments at beginning
     of period                     803.5       736.0       871.6       722.9
    -------------------------------------------------------------------------
    Cash and short-term
     investments at end of
     period                    $   819.8   $   871.6   $   819.8   $   871.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash at end of period      $    66.4   $    64.7   $    66.4   $    64.7
    Short-term investments at
     end of period                 753.4       806.9       753.4       806.9
    -------------------------------------------------------------------------
    Total cash and short-term
     investments at end of
     period                    $   819.8   $   871.6   $   819.8   $   871.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

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


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