Sears Canada Reports Second Quarter Earnings



    TORONTO, Aug. 19 /CNW/ - Sears Canada Inc. (TSX: SCC) today announced its
unaudited second quarter results. Total revenues for the 13-week period ended
August 1, 2009 were $1.250 billion compared to $1.420 billion for the 13 weeks
ended August 2, 2008, a decrease of 12.0%. Same store sales decreased 10.0%.
Cash, restricted cash and investments increased $109.5 million from $785.6
million as at August 2, 2008 compared to $895.1 million as at August 1, 2009,
with total debt of $361.7 million as at August 1, 2009.
    Net earnings for the second quarter were $49.1 million or 45 cents per
share compared to $61.5 million or 57 cents per share in the second quarter
last year. There were no unusual items in the quarter this year or last year.
    Operating EBITDA (Earnings before interest, taxes, depreciation and
amortization) for the quarter this year was $108.7 million versus $125.0
million in the same 13-week period last year. Gross margins increased 5 basis
points as a percentage to revenue. Total expenses were reduced by 11.2%.
    Total revenues for the 26-week period ended August 1, 2009 were $2.367
billion compared to $2.675 billion for the 26-week period last year, which
ended August 2, 2008, a decrease of 11.5%. Same store sales decreased 10.2%.
    Net earnings for the 26 weeks ended August 1, 2009 were $59.4 million or
55 cents per share compared to $132.3 million or $1.23 per share for the same
26-week period last year. Operating net earnings for the first 26 weeks of
2009 were $65.9 million or 61 cents per share compared to $104.0 million or 97
cents per share for same 26-week period last year.
    Operating EBITDA for the first half of the year was $171.0 versus $219.4
million for the same period last year. Gross margins decreased 39 basis points
as a percentage to revenue. Total expenses were reduced by 9.6%.
    Commenting on the second quarter and first half, Dene Rogers, President
and Chief Executive Officer, Sears Canada Inc. said, "Revenues were negatively
impacted by lower consumer discretionary spending as a result of the recession
and the cool summer that affected most of Canada except British Columbia. We
managed both margins and expenses to maintain profitability. As a result,
Sears operating EBITDA performance to last year remains among the best in the
Canadian retail industry."
    "Our 33,000 associates across Canada continue to be committed to
improving the lives of our customers by providing products, services and
solutions that earn their trust and build lifetime relationships," added Mr.
Rogers.

    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 196 corporate
stores, 193 dealer stores, 41 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.
    RECONCILIATION OF NET EARNINGS TO OPERATING EBITDA
    Unaudited

                                    Second Quarter(2)      Year-to-Date(2)
                                  -------------------------------------------
    (in millions)                      2009       2008       2009       2008
    -------------------------------------------------------------------------
    Net earnings(1)               $    49.1  $    61.5  $    59.4  $   132.3
    -------------------------------------------------------------------------
    Non-Operating activities,
     net of taxes
      Restructuring expense               -          -        6.5          -
      Unusual items - Sale of real
       estate/joint venture               -          -          -      (28.3)
    -------------------------------------------------------------------------
    Operating net earnings(1)     $    49.1  $    61.5  $    65.9  $   104.0
    -------------------------------------------------------------------------
    Depreciation and amortization      28.8       31.8       58.9       64.0
    Interest expense, net               5.8        2.1       11.9        2.6
    Income taxes expense excluding
     operating adjustments(1)          25.0       29.6       34.3       48.8
    -------------------------------------------------------------------------
    Operating EBITDA              $   108.7  $   125.0  $   171.0  $   219.4
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net earnings per share        $    0.45  $    0.57  $    0.55  $    1.23
    Operating net earnings per
     share                        $    0.45  $    0.57  $    0.61  $    0.97
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Net earnings and income taxes expense for the second quarter and
        year-to-date ("YTD") 2008 have been restated as a result of the
        retrospective application of the change in accounting policy related
        to the adoption of Goodwill and Intangible Assets.

    (2) The second quarter and YTD periods of 2009 and 2008 represent the 13
        and 26-week periods ended August 1, 2009 and August 2, 2008,
        respectively.



    SEARS CANADA INC.
    CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

    Unaudited
                                                          As at        As at
                                                       August 2,  January 31,
                                             As at         2008         2009
                                          August 1,   (Restated    (Restated
    (in millions)                             2009     - Note 2)    - Note 2)
    -------------------------------------------------------------------------

    ASSETS
    Current Assets
    Cash and short-term investments      $   782.0    $   783.0    $   819.8
    Restricted cash and investments
     (Note 14)                               113.1          2.6        144.8
    Accounts receivable                      136.0        154.6        138.7
    Income taxes recoverable                  51.6         24.3         16.6
    Inventories                              952.9        999.5        968.3
    Prepaid expenses and other assets         94.5         92.0        147.9
    Current portion of future income tax
     assets                                   29.7         32.1          8.7
    -------------------------------------------------------------------------
                                           2,159.8      2,088.1      2,244.8

    Capital assets                           652.1        707.9        696.0
    Deferred charges                         177.9        192.5        185.2
    Intangible Assets                         16.9          9.4         16.8
    Goodwill                                  11.2         11.2         11.2
    Future income tax assets                  34.7         25.1         28.4
    Other long-term assets                    46.1         32.2         54.9
    -------------------------------------------------------------------------
                                         $ 3,098.7    $ 3,066.4    $ 3,237.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current Liabilities
    Accounts payable                     $   522.1    $   650.9    $   640.9
    Accrued liabilities                      366.5        411.3        383.6
    Income and other taxes payable            32.6         39.2         39.4
    Principal payments on long-term
     obligations due within one year
     (Note 5)                                239.3         15.2         32.1
    -------------------------------------------------------------------------
                                           1,160.5      1,116.6      1,096.0

    Long-term obligations                    122.4        354.1        332.5
    Accrued benefit liability (Note 13)      163.1        169.0        158.5
    Other long-term liabilities              162.5        165.3        167.1
    -------------------------------------------------------------------------
                                           1,608.5      1,805.0      1,754.1
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Capital stock (Note 10)                   15.7         15.7         15.7
    Retained earnings                      1,458.5      1,240.7      1,399.1
    Accumulated other comprehensive
     income                                   16.0          5.0         68.4
    -------------------------------------------------------------------------
                                           1,490.2      1,261.4      1,483.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                         $ 3,098.7    $ 3,066.4    $ 3,237.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    SEARS CANADA INC.
    CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
    For the 13 and 26-week periods ended August 1, 2009 and August 2, 2008

    Unaudited

                                     13-Week Period        26-Week Period
                                  --------------------- ---------------------
                                                  2008                  2008
    (in millions, except per                 (Restated             (Restated
     share amounts)                    2009   - Note 2)      2009   - Note 2)
    -------------------------------------------------------------------------

    Total revenues                $ 1,250.0  $ 1,420.3  $ 2,366.5  $ 2,674.7
    -------------------------------------------------------------------------
    Cost of merchandise sold,
     operating, administrative and
     selling expenses               1,141.3    1,295.3    2,204.8    2,455.3
    Depreciation and amortization      28.8       31.8       58.9       64.0
    Interest expense, net (Note 5)      5.8        2.1       11.9        2.6
    Unusual items - (gain) (Note 6)       -          -          -      (37.2)
    -------------------------------------------------------------------------
    Earnings before income taxes       74.1       91.1       90.9      190.0
    -------------------------------------------------------------------------
    Income taxes expense (recovery)
      Current                          28.2       27.4       34.6       78.8
      Future                           (3.2)       2.2       (3.1)     (21.1)
    -------------------------------------------------------------------------
                                       25.0       29.6       31.5       57.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings                  $    49.1  $    61.5  $    59.4  $   132.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings per share
     (Note 7)                     $    0.45  $    0.57  $    0.55  $    1.23
    -------------------------------------------------------------------------
    Diluted net earnings per share
     (Note 7)                     $    0.45  $    0.57  $    0.55  $    1.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings                  $    49.1  $    61.5  $    59.4  $   132.3
    Other comprehensive income
     (loss), net of taxes:
      Mark-to-market adjustment
       related to short-term
       investments, net of income
       taxes recovery of $0.1 and
       Nil (2008: Nil and less than
       $0.1)                           (0.2)         -       (0.1)      (0.1)
      Loss on foreign exchange
       derivatives designated as
       cash flow hedges, net of
       income taxes recovery of
       $11.0 and $15.6 (2008:
       expense of $1.3 and $2.4)      (24.0)       2.8      (33.9)       5.0
      Reclassification to net
       earnings of gain on foreign
       exchange derivatives
       designated as cash flow
       hedges, net of income taxes
       expense of $ 4.4 and $8.7
       (2008: recovery Nil and
       less than $0.1)                 (9.3)         -      (18.6)       0.1
      Gain on fuel derivatives
       designated as cash flow
       hedges, net of income taxes
       expense of less than $0.1
       and $0.1 (2008: Nil and Nil)     0.2          -        0.2          -
    -------------------------------------------------------------------------
    Other comprehensive (loss)
     income (Note 16)                 (33.3)       2.8      (52.4)       5.0
    -------------------------------------------------------------------------
    Comprehensive income          $    15.8  $    64.3  $     7.0  $   137.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
     AND ACCUMULATED OTHER COMPREHENSIVE INCOME
    For the 13 and 26-week periods ended August 1, 2009 and August 2, 2008

    Unaudited

                                     13-Week Period        26-Week Period
                                  --------------------- ---------------------
                                                  2008                  2008
                                             (Restated             (Restated
    (in millions)                      2009   - Note 2)      2009   - Note 2)
    -------------------------------------------------------------------------
    Retained earnings
    Opening balance               $ 1,409.4  $ 1,179.2  $ 1,424.0  $ 1,135.4
    Adjustment to opening retained
     earnings resulting from
     adoption of new accounting
     standards for goodwill and
     intangible assets, net of
     income taxes of $12.4 (Note 2)       -          -      (24.9)     (27.0)
    Net earnings                       49.1       61.5       59.4      132.3
    -------------------------------------------------------------------------

    Closing balance               $ 1,458.5  $ 1,240.7  $ 1,458.5  $ 1,240.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive income
    Opening balance               $    49.3  $     2.2  $    68.4  $       -
    Other comprehensive (loss)
     income                           (33.3)       2.8      (52.4)       5.0
    -------------------------------------------------------------------------

    Closing balance               $    16.0  $     5.0  $    16.0  $     5.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings and
     accumulated other
     comprehensive income         $ 1,474.5  $ 1,245.7  $ 1,474.5  $ 1,245.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    SEARS CANADA INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the 13 and 26-weeks ended August 1, 2009 and August 2, 2008

    Unaudited

                                     13-Week Period        26-Week Period
                                  --------------------- ---------------------
                                                  2008                  2008
                                             (Restated             (Restated
    (in millions)                      2009   - Note 2)      2009   - Note 2)
    -------------------------------------------------------------------------
    Cash flow generated from (used
     for) operating activities
      Net earnings                $    49.1  $    61.5  $    59.4  $   132.3
      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                        27.1       41.0       63.6       14.3
      Changes in non-cash working
       capital balances related to
       operations                     (37.7)     (72.8)    (157.0)    (219.0)
      Other, principally pension
       contributions and changes to
       long-term assets and
       liabilities                     (0.9)      (2.2)      (5.2)      (4.5)
    -------------------------------------------------------------------------
                                       37.6       27.5      (39.2)     (76.9)
    -------------------------------------------------------------------------

    Cash flow generated from (used
     for) investing activities
      Purchases of capital assets     (15.5)     (12.8)     (33.8)     (44.2)
      Proceeds from sale of capital
       assets                           0.4          -        0.8       40.1
      Deferred charges                 (0.7)      (0.3)      (0.7)      (0.3)
      Changes in restricted cash and
       investments (Current and
       Long-term)                      17.9        4.4       38.0        2.6
      Acquisition, net of cash
       acquired                           -          -          -       (7.0)
    -------------------------------------------------------------------------
                                        2.1       (8.7)       4.3       (8.8)
    -------------------------------------------------------------------------

    Cash flow used for financing
     activities
      Repayment of long-term
       obligations                     (2.7)      (2.2)      (2.9)      (2.9)
    -------------------------------------------------------------------------

    Increase (decrease) in cash and
     short-term investments            37.0       16.6      (37.8)     (88.6)
    Cash and short-term investments
     at beginning of period           745.0      766.4      819.8      871.6
    -------------------------------------------------------------------------
    Cash and short-term investments
     at end of period             $   782.0  $   783.0  $   782.0  $   783.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash at end of period         $    74.3  $    57.7  $    74.3  $    57.7
    Short-term investments at end
     of period                        707.7      725.3      707.7      725.3
    -------------------------------------------------------------------------
    Total cash and short-term
     investments at end of
     period                       $   782.0  $   783.0  $   782.0  $   783.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    SEARS CANADA INC.
    NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
    AUGUST 1, 2009

    Unaudited

    1.  BASIS OF PRESENTATION

    These unaudited interim consolidated financial statements (the "Financial
    Statements") of Sears Canada Inc. (the "Company") have been prepared in
    accordance with Canadian Generally Accepted Accounting Principles
    ("GAAP") but do not contain all disclosures required by Canadian GAAP for
    annual financial statements. Accordingly, these Financial Statements
    should be read in conjunction with the most recently prepared audited
    annual consolidated financial statements for the 52-week period ended
    January 31, 2009 ("2008 Annual Financial Statements"). These Financial
    Statements for the second quarter ended August 1, 2009 follow the same
    accounting policies and methods of application as those used in the
    preparation of the 2008 Annual Financial Statements, except as described
    in Note 2, Accounting Policies and Estimates.

    The Company's operations are seasonal in nature. Accordingly, merchandise
    and service revenues, as well as performance payments received from
    JPMorgan Chase & Co, N.A. (Toronto Branch) ("JPMorgan Chase") under the
    long-term credit card marketing and servicing alliance, will vary by
    quarter based upon consumer spending behaviour. Historically, the
    Company's revenues and earnings are higher in the fourth quarter than in
    any of the other three quarters due to the holiday season. The Company is
    able to adjust certain variable costs in response to seasonal revenue
    patterns; however, costs such as occupancy are fixed, causing the Company
    to report a disproportionate level of earnings in the fourth quarter.
    This business seasonality results in quarterly performance that is not
    necessarily indicative of the year's performance.

    2.  ACCOUNTING POLICIES AND ESTIMATES

    New Policies:

    These Financial Statements follow the same accounting policies and
    methods of application as the 2008 Annual Financial Statements, with the
    following exceptions:

    Goodwill and Intangible Assets

    In February 2008, the Canadian Institute of Chartered Accountants
    ("CICA") issued Handbook Section 3064, "Goodwill and Intangible Assets"
    ("Section 3064"), which replaced Section 3062, "Goodwill and Other
    Intangible Assets" and Section 3450, "Research and Development Costs".
    The new standard is effective for interim and annual financial statements
    issued for fiscal years beginning on or after October 1, 2008. The new
    standard provides further guidance on the recognition and treatment of
    internally developed intangibles and requires elimination of the practice
    of deferring costs that do not meet the definition and recognition
    criteria of assets. Section 3064 reinforces a principle-based approach to
    the recognition of costs as assets in accordance with the definition of
    an asset and criteria for the recognition of an asset in CICA Handbook
    Section 1000, "Financial Statement Concepts".

    The Company has adopted the new accounting standard issued by the CICA
    Section 3064, effective fiscal 2009. The primary impact of implementing
    this standard was with respect to the accounting policy for Catalogue
    Production Costs ("CPC"). On adoption of the standard, CPC will be
    expensed once the catalogue has been mailed to the customer. Prior to the
    adoption of the standard CPC costs were capitalized and amortized over
    the life of the catalogue. As a result, certain figures from the prior
    year have been restated due to the retrospective application of a change
    in accounting policy, as required under CICA Handbook Section 1506,
    "Accounting Changes". As a result of this retrospective restatement the
    following table summarizes the increase (decrease) to the 2008
    comparative figures contained herein as at and for the 13 and 26-week
    periods ended August 2, 2008 and the year ended January 31, 2009 from the
    figures previously reported:

                                                               As at and for
                               As at and for   As at and for     the 52-week
                                 the 13-week     the 26-week    Period Ended
    (increase (decrease)        Period Ended    Period Ended      January 31,
     in millions)             August 2, 2008  August 2, 2008            2009
    -------------------------------------------------------------------------
    Prepaid expenses and
     other assets                     $(25.5)         $(25.5)         $(34.6)
    Current portion of
     future income tax asset             8.5             8.5             8.4
    Deferred charge                     (1.9)           (1.9)           (1.7)
    Future income tax asset                -               -             0.5
    Future income tax liability            -               -            (2.5)
    Net earnings                         0.4             8.1             2.1
    Opening retained earnings          (19.3)          (27.0)          (27.0)
    Closing retained earnings          (18.9)          (18.9)          (24.9)
    -------------------------------------------------------------------------

    The Company's intangible assets are comprised of software costs. These
    costs were previously recorded as a Capital Asset prior to the adoption
    of Section 3064. Intangible assets are amortized on a straight-line basis
    over their estimated useful lives, and are reported separately as
    "Intangible Assets" in the interim Consolidated Statements of Financial
    Position. Intangible Assets are tested for impairment annually or more
    frequently if changes in circumstances indicate a potential impairment.
    Impairment is recognized in net earnings and is measured as the amount by
    which the carrying amount exceeds its fair value.

    Goodwill represents the excess of the cost of acquisition over the fair
    value of the identifiable assets acquired, resulting from the acquisition
    of a duct cleaning business in 2008, Cantrex Group Inc. ("Cantrex") in
    2005 and a home services operation in 2001. Goodwill is not amortized,
    and is reported separately as "Goodwill" in the interim Consolidated
    Statements of Financial Position. Goodwill is tested for impairment
    annually or more frequently if changes in circumstances indicate a
    potential impairment. Impairment is recognized in net earnings and is
    measured as the amount by which the carrying amount of the goodwill
    exceeds its fair value. No impairment has been recognized on the
    Company's goodwill since acquisition.

    Credit Risk and the Fair Value of Financial Assets and Financial
    Liabilities

    The Company adopted Emerging Issues Committee "EIC"-173, "Credit Risk and
    the Fair Value of Financial Assets and Financial Liabilities". The EIC
    reached a consensus that the Company's credit risk and the credit risk of
    the counterparty should be taken into account in determining the fair
    value of financial assets and financial liabilities. The abstract is to
    be applied retrospectively without restatement of prior periods to
    interim and annual financial statements for periods ending on or after
    January 20, 2009. The implementation of the new abstract has had no
    material impact on the Company's results of operations, financial
    position or disclosures.

    Financial Instruments - Recognition and Measurement

    In April 2009, the CICA amended Handbook Section 3855, "Financial
    Instruments - Recognition and Measurement", ("Section 3855") to converge
    with International Accounting Standards 39, "Financial Instruments:
    Recognition and Measurement" ("IAS 39"). The amendment was made to
    clarify the calculation of interest on an interest-bearing asset after
    recognition of an impairment loss. The amendment is effective on
    issuance. The Company adopted the section with no impact on the Company's
    results of operations, financial position or disclosures.

    In June 2009 the CICA amended Handbook Section 3855 to converge with IAS
    39 and International Financial Reporting Interpretations Committee 9,
    "Reassessment of Embedded Derivatives" ("IFRIC 9"). The amendment was
    made to provide guidance concerning the assessment of embedded
    derivatives upon reclassification of a financial asset out of the held-
    for-trading category. The amendment is effective for reclassifications
    made on or after July 1, 2009. The Company adopted the section with no
    impact on the Company's results of operations, financial position or
    disclosures.

    Future Accounting Policies:

    International Financial Reporting Standards ("IFRS")

    The Canadian Accounting Standards Board confirmed, in February 2008, that
    it will require all public companies to adopt IFRS for interim and annual
    financial statements relating to fiscal years beginning on or after
    January 1, 2011. In the year of adoption, companies will be required to
    provide comparative information as if IFRS had been used in the preceding
    fiscal year. The transition from Canadian GAAP to IFRS will be applicable
    to the Company's first quarter of operations for fiscal 2011, at which
    time the Company will prepare both its fiscal 2011 and fiscal 2010
    comparative financial information using IFRS. The Company expects the
    transition to IFRS to impact financial reporting, business processes,
    internal controls and information systems. The Company is currently
    assessing the impact of the transition to IFRS on these areas and will
    continue to invest in training and resources throughout the transition
    period to facilitate a timely conversion.

    Financial Instruments - Recognition and Measurement

    In April 2009, the CICA amended Handbook Section 3855 to converge with
    IAS 39 to provide guidance on when a put, call, surrender or prepayment
    option embedded in a host debt instrument is closely related to the host
    instrument. The amendment is effective for interim and annual financial
    statements relating to fiscal years beginning on or after January 1, 2011
    with earlier adoption permitted. The Company is currently evaluating the
    future impact of this amendment on its consolidated financial statements.

    In July 2009, the CICA amended Handbook Section 3855 to converge with
    IFRS for impairment of debt instruments by changing the categories into
    which debt instruments are required and permitted to be classified. The
    amendments are effective for annual financial statements relating to
    fiscal years beginning on or after November 1, 2008. An entity is
    permitted, but not required, to apply these amendments to interim
    financial statements relating to periods within the fiscal year of
    adoption only if those interim financial statements are issued on or
    after August 20, 2009. The Company is currently evaluating the future
    impact of this amendment on its 2009 consolidated financial statements.

    Financial Instruments - Disclosures

    In June 2009, the CICA amended Handbook Section 3862, "Financial
    Instruments - Disclosures" ("Section 3862"), to adopt the amendments
    recently proposed by the International Accounting Standards Board
    ("IASB") to IFRS 7, "Financial Instruments: Disclosures". The amendments
    were made to enhance disclosures about fair value measurements, including
    the relative reliability of the inputs used in those measurements, and
    about the liquidity risk of financial instruments. The amendments are
    effective for annual financial statements relating to fiscal years ending
    after September 30, 2009 for publicly accountable enterprises, private
    enterprises, co-operative business enterprises, rate-regulated
    enterprises and not-for-profit organizations that choose to apply Section
    3862. Comparative information for the disclosures required by the
    amendments is not required in the first year of application. The Company
    is currently evaluating the future impact of this amendment on its 2009
    consolidated financial statements.

    Estimates:

    Loyalty Program Reserves

    During the second quarter, the Company revised certain assumptions used
    to calculate the loyalty program reserves based on new information
    regarding redemption rates and the associated cost of the program. The
    net impact was an increase to pre-tax earning of $7.0 million due to a
    decrease in the loyalty reserve.

    3.  INVENTORIES

    The amount of inventories recognized as an expense during the 13 and 26-
    week periods ended August 1, 2009 was $636.3 million (2008:
    $726.2 million) and $1,201.6 million (2008: $1,356.5 million),
    respectively, including $16.1 million (2008: $21.3 million) and
    $43.0 million (2008: $42.4 million), related to write-downs. A negligible
    amount of write-downs were reversed during each of the 13 and 26-week
    periods ended August 1, 2009.

    With the exception of $32.5 million (2008: $32.1 million) of inventories
    from the Company's parts and service and home improvement businesses, the
    Company's entire inventories balance consists of merchandise finished
    goods. (Comparative figures for 2008 represent balances as at January 31,
    2009.)

    4.  VENDOR REBATES

    The Company has recognized $0.6 million and $1.0 million, as a reduction
    in the cost of purchases for the 13 and 26-week periods ended August 1,
    2009 related to binding agreements for which full entitlement has not yet
    been met but is probable.

    5.  LONG-TERM OBLIGATIONS

    The Company has a corporate credit rating of BB and BB- from Dominion
    Bond Ratings Service and Standard and Poor's respectively and a corporate
    family rating of Ba1 from Moody's Investors Service, Inc.

    The Company is no longer subject to any financial covenants and the
    Company's long-term debt consists of unsecured medium-term notes with
    fixed interest rates and payment terms. As at August 1, 2009 the Company
    had outstanding letters of credit of U.S. $54.0 million used to support
    the Company's offshore merchandise purchasing program with restricted
    cash and investments pledged as collateral.

    Interest expense on long-term debt for the 13 and 26-week periods ended
    August 1, 2009 amounted to $6.2 million (2008: $7.2 million) and
    $13.2 million (2008: $14.5 million), respectively. The Company's cash
    payments for interest on long-term debt in the 13 and 26-week periods
    ended August 1, 2009 totalled $8.1 million (2008: $9.0 million) and
    $13.1 million (2008: $14.2 million), respectively.

    In the 13 and 26-week periods ended August 1, 2009, the Company recorded
    $0.4 million (2008: $5.1 million) and $1.3 million (2008: $11.9 million),
    respectively, of interest revenue, net of short-term interest expense,
    primarily related to cash and short-term investments. The Company
    received cash in the amount of $0.4 million (2008: $3.8 million) and
    $1.8 million (2008: $12.9 million) in respect of short-term interest
    revenue, net of short-term interest expense, during the 13 and 26-week
    periods ended August 1, 2009, respectively.

    During the quarter $200.0 million of medium term notes due May 10, 2010
    were reclassified from long-term obligations to current liabilities.

    6.  UNUSUAL ITEMS

    There were no unusual items for the 13 and 26-week periods ended August
    1, 2009.

    In the first quarter of 2008, the Company completed the sale of property
    in Calgary, Alberta where it operated a full-line store. The Company
    received proceeds of approximately $40.0 million recording a pre-tax gain
    of $37.2 million, net of transaction costs.

    7.  NET EARNINGS PER SHARE

    A reconciliation of the number of shares used in the net earnings per
    share calculation is as follows:


                           13-week       13-week       26-week       26-week
                      Period Ended  Period Ended  Period Ended  Period Ended
                          August 1,     August 2,     August 1,     August 2,
    (Number of shares)        2009          2008          2009          2008
    -------------------------------------------------------------------------

    Average number of
     shares per basic
     net earnings per
     share
     calculation       107,620,995   107,620,995   107,620,995   107,620,995

    Effect of dilutive
     instruments
     outstanding             4,374         9,428         3,815        11,481
    -------------------------------------------------------------------------

    Average number of
     shares per
     diluted net
     earnings per
     share
     calculation       107,625,369   107,630,423   107,624,810   107,632,476
    -------------------------------------------------------------------------

    For the 13 and 26-week periods ended August 1, 2009, 126,081 options
    (2008: 166,481 options) were excluded from the calculation of diluted net
    earnings per share as they were anti-dilutive.

    8.  SEGMENTED INFORMATION

    Segmented Statements of Earnings

                                         13-Week                     26-Week
                                    Period Ended                Period Ended
                           13-Week      August 2,      26-Week      August 2,
                      Period Ended          2008  Period Ended          2008
                          August 1,  (Restated -      August 1,  (Restated -
    (in millions)             2009        Note 2)         2009        Note 2)
    -------------------------------------------------------------------------
    Total revenues
      Merchandising     $  1,237.4    $  1,408.4    $  2,342.2    $  2,650.7
      Real Estate
       Joint Ventures         12.6          11.9          24.3          24.0
    -------------------------------------------------------------------------
    Total revenues      $  1,250.0    $  1,420.3    $  2,366.5    $  2,674.7
    -------------------------------------------------------------------------
    Segmented
     operating profit
      Merchandising     $     74.7    $     88.0    $     92.6    $    144.5
      Real Estate
       Joint Ventures          5.2           5.2          10.2          10.9
    Interest expense, net      5.8           2.1          11.9           2.6
    Unusual items - (gain)       -             -             -         (37.2)
    Income taxes              25.0          29.6          31.5          57.7
    -------------------------------------------------------------------------
    Net earnings        $     49.1    $     61.5    $     59.4    $    132.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Segmented Statements of Capital Employed(1)

                                                         As at         As at
                                                      August 2,   January 31,
                                           As at          2008          2009
                                        August 1,  (Restated -   (Restated -
    (in millions)                           2009        Note 2)       Note 2)
    -------------------------------------------------------------------------
    Merchandising                     $  1,750.3    $  1,530.4    $  1,743.5
    Real Estate Joint Ventures             101.6         100.3         104.3
    -------------------------------------------------------------------------
    Total                             $  1,851.9    $  1,630.7    $  1,847.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Capital Employed represents the total of long-term obligations,
        including principal payments on long-term obligations due within one
        year, and shareholders' equity, which includes capital stock,
        retained earnings and accumulated other comprehensive income
        ("AOCI").


    Segmented Statements of Total Assets
                                                         As at         As at
                                                      August 2,   January 31,
                                           As at          2008          2009
                                        August 1,  (Restated -   (Restated -
    (in millions)                           2009        Note 2)       Note 2)
    -------------------------------------------------------------------------
    Merchandising                     $  2,986.9    $  2,957.0    $  3,120.9
    Real Estate Joint Ventures             111.8         109.4         116.4
    -------------------------------------------------------------------------
    Total                             $  3,098.7    $  3,066.4    $  3,237.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9.  INCOME TAXES

    The Company's total net cash payments of income taxes in the 13 and 26-
    week periods ended August 1, 2009 were $30.8 million (2008:
    $24.6 million) and $69.7 million (2008: $134.0 million), respectively.

    In the ordinary course of business, the Company is subject to ongoing
    audits by tax authorities. While the Company believes that its tax filing
    positions are appropriate and supportable, periodically, certain matters
    are challenged by tax authorities. As the Company routinely evaluates and
    provides for potentially unfavourable outcomes with respect to any tax
    audits, the Company believes that the final disposition of tax audits
    will not have a material adverse effect on its liquidity, consolidated
    financial position or results of operations. If the result of a tax audit
    materially differs from the existing provisions, the Company's effective
    tax rate and its net earnings may be affected positively or negatively in
    the period in which the tax audits are completed. Included in other long
    term assets is a receivable of $17.1 million related to a payment made by
    the Company for a tax assessment that is being disputed.

    10. CAPITAL STOCK

    As at August 1, 2009, 107,620,995 common shares were issued and
    outstanding. Sears Holdings Corporation, the controlling shareholder of
    the Company, is the beneficial holder of 78,680,790, or 73.1%, of the
    common shares of the Company as at August 1, 2009. The number of
    outstanding common shares did not change from the end of fiscal 2008.

    11. STOCK-BASED COMPENSATION

    The Employees Stock Plan expired on April 19, 2008 however; the
    expiration of the plan does not affect the rights of current option
    holders. Options were last granted in 2004 which are exercisable within
    10 years from the grant date. All options currently outstanding will
    expire before or in February 2014. As at August 1, 2009 there were
    166,061 stock options outstanding under the Employees Stock Plan.

    At the end of each fiscal period, the Company records a liability for
    previously issued tandem awards equal to the amount by which the market
    price of its shares at the end of the period exceeds the exercise price
    of the vested tandem awards. Stock compensation expense is recorded to
    adjust the liability for changes in the market price of the Company's
    shares and for awards exercised in the period. Total stock-based
    compensation expense related to tandem awards issued from the Employees
    Stock Plan during the 13 and 26-week periods ended August 1, 2009 was
    expense of less than $0.1 million (2008: credit of $0.2 million) and
    expense of $0.1 million (2008: credit of $0.1 million), respectively.

    12. GUARANTEES

    The Company has provided the following significant guarantees to third
    parties:

    Sub-lease agreements

    The Company has a number of sub-lease agreements with third parties. The
    Company retains ultimate responsibility to the landlord for payment of
    amounts under the lease agreements should the sub-lessee fail to pay. The
    total future lease payments under such agreements are $18.3 million.

    Other indemnification agreements

    In the ordinary course of business the Company has provided
    indemnification commitments to counterparties in transactions such as
    leasing transactions, royalty agreements, service arrangements,
    investment banking agreements, director and officer indemnification
    agreements and indemnification of trustees under indentures for
    outstanding public debt. The Company has also provided certain
    indemnification agreements in connection with the sale of the Credit and
    Financial Services operations in November 2005. The foregoing
    indemnification agreements require the Company to compensate the
    counterparties for costs incurred as a result of changes in laws and
    regulations or as a result of litigation claims or statutory claims or
    statutory sanctions that may be suffered by a counterparty as a
    consequence of the transaction. The terms of these indemnification
    agreements will vary based on the contract and typically do not provide
    for any limit on the maximum potential liability. Historically, the
    Company has not made any significant payments under such indemnifications
    and no amount has been accrued in the Financial Statements with respect
    to these indemnification commitments.

    13. ASSOCIATE FUTURE BENEFITS

    The net expense for the defined benefit, defined contribution and other
    benefit plans for the 13-week period ended August 1, 2009 were
    $0.4 million (2008: $1.4 million), $3.9 million (2008: $1.8 million) and
    $2.4 million (2008: $2.7 million), respectively. The net expense for the
    defined benefit, defined contribution and other benefit plans for the 26-
    week period ended August 1, 2009 were $0.8 million (2008: $4.7 million),
    $8.7 million (2008: $1.8 million) and $4.9 million (2008: $5.2 million),
    respectively. The Company introduced the defined contribution plan on
    July 1, 2008.

    14. COMMITMENTS AND CONTINGENCIES

    In addition to the class action suit described in the annual financial
    statements, the Company is involved in various legal proceedings
    incidental to the normal course of business. The Company is of the view
    that although the outcome of such legal proceedings cannot be predicted
    with certainty, the final disposition is not expected to have a material
    adverse effect on the Company's consolidated financial position or
    results of operations.

    Restricted Cash and Investments

    Cash and investments are considered to be restricted when it is subject
    to contingent rights of a third party customer, vendor, or government
    agency. As at August 1, 2009, the Company recorded $113.1 million (2008:
    $144.8 million) of restricted cash and investments recorded as current
    assets and $0.7 million (2008: $6.9 million) of restricted cash deposits
    recorded in other long-term assets. These balances represent cash and
    investments pledged as collateral for letter of credit obligations issued
    under the Company's offshore merchandise purchasing program of
    $75.5 million (2008: $110.4 million), current and long-term cash deposits
    pledged as collateral with counterparties related to outstanding
    derivative contracts of $34.4 million (2008: $28.3 million) and
    $0.7 million (2008: $6.9 million), respectively, and funds held in trust
    in accordance with regulatory requirements governing advance ticket sales
    related to Sears Travel of $3.2 million (2008: $6.1 million).
    (Comparative figures for 2008 represent balances as at January 31, 2009.)

    15. CAPITAL DISCLOSURES

    The Company's objectives when managing capital are:

    -   Maintain financial flexibility thus allowing the Company to preserve
        its ability to meet financial objectives and continue as a going
        concern;
    -   Provide an appropriate return to shareholders; and
    -   Maintain a capital structure that allows the Company to obtain
        financing should the need arise.

    The Company manages and makes adjustments to its capital structure, when
    necessary, in light of changes in economic conditions, the objectives of
    its shareholders, the cash requirements of the business and the condition
    of capital markets. In order to maintain or adjust the capital structure
    the Company may pay a dividend or return capital to shareholders,
    increase/decrease debt or sell assets.

    The Company defines capital as follows:

    -   Long-term obligations, including the current portion ("Long-term
        obligations"); and
    -   Shareholders' equity.

    The following table presents summary quantitative data with respect to
    the Company's capital:

                                                         As at         As at
                                                      August 2,   January 31,
                                           As at          2008          2009
                                        August 1,  (Restated -   (Restated -
    (in millions)                           2009        Note 2)       Note 2)
    -------------------------------------------------------------------------
    Long-term
     obligations                      $    361.7    $    369.3    $    364.6
    Shareholders' equity                 1,490.2       1,261.4       1,483.2
    -------------------------------------------------------------------------
                                      $  1,851.9    $  1,630.7    $  1,847.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at August 1, 2009, the Company is not subject to any financial
    covenants or ratios and the outstanding notes are unsecured. The Company
    has a U.S. $120.0 million letter of credit facility with restricted cash
    and investments pledged as collateral against outstanding amounts.

    16. FINANCIAL INSTRUMENTS

    In the ordinary course of business, the Company enters into financial
    agreements with banks and other financial institutions to reduce
    underlying risks associated with interest rates and foreign currency. The
    Company does not hold or issue derivative financial instruments for
    trading or speculative purposes.

    Financial instrument risk management

    The Company's adoption of Section 3862, "Financial Instruments-
    Disclosure" and Section 3863, "Financial Instruments-Presentation" on
    February 3, 2008, has resulted in additional disclosure relating to the
    Company's exposure to risks arising from financial instruments. The
    Company is exposed to credit, liquidity and market risk as a result of
    holding financial instruments. Market risk consists of foreign exchange,
    interest rate and commodity price risk.

    Credit risk

    Credit risk refers to the possibility that the Company can suffer
    financial losses due to the failure of the Company's counterparties to
    meet their payment obligations. Exposure to credit risk exists for
    derivative instruments, cash and short-term investments, restricted cash
    and investments and accounts receivable.

    As at August 1, 2009, the Company's only exposure to counterparty risk as
    it relates to derivative instruments is represented by the fair value of
    the derivative contracts of $21.7 million. These contracts are placed
    with financial institutions with secure credit ratings.

    Cash and short-term investments, restricted cash and investments and
    other long-term assets of $819.8 million also expose the Company to
    credit risk should the borrower default on maturity of the investment.
    The Company manages this exposure through policies that require borrowers
    to have a minimum credit rating of A, and limiting investments with
    individual borrowers at maximum levels based on credit rating.

    The Company is exposed to minimal credit risk from customers as a result
    of ongoing credit evaluations and review of accounts receivable
    collectability. As at August 1, 2009, approximately 51% of the Company's
    accounts receivable are due from two customers who are both current on
    their account.

    Liquidity risk

    Liquidity risk is the risk that the Company may not have cash available
    to satisfy financial liabilities as they come due. The Company actively
    maintains access to adequate funding sources to ensure it has sufficient
    available funds to meet current and foreseeable financial requirements at
    a reasonable cost.

    The following table summarizes the carrying amount and the contractual
    maturities of both the interest and principal portion of significant
    financial liabilities as at August 1, 2009:


                                     Contractual Cash Flow Maturities
                            -------------------------------------------------
                                                  1 year   3 years
                  Carrying              Within        to        to    Beyond
    (in millions)   Amount     Total    1 year   3 years   5 years   5 years
    -------------------------------------------------------------------------
    Accounts
     payable      $  522.1  $  522.1  $  522.1  $      -  $      -  $      -
    Accrued
     liabilities     366.5     366.5     366.5         -         -         -
    Long-term
     obligations
     and payments
     due within
     1 year          361.7     399.0     266.3     114.1       8.6      10.0
    Operating lease
     obligations(2)      -     672.9     107.4     178.8     134.1     252.6
    -------------------------------------------------------------------------
                  $1,250.3  $1,960.5  $1,262.3  $  292.9  $  142.7  $  262.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (2) Operating lease obligations are not reported on the consolidated
        statement of financial position.

    Management believes that cash on hand, future cash flows generated from
    operations and availability of current and future funding will be
    adequate to support these financial liabilities.

    Market risk

    Market risk exists as a result of the potential for losses caused by
    changes in market factors such as interest rates, foreign currency
    exchange rates and commodity prices.

    Foreign exchange risk

    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 August 1, 2009, there were
    derivative contracts outstanding with a notional value of U.S.
    $314.8 million and a combined carrying value of $16.3 million, included
    in prepaid expenses and other assets. These derivative contracts have
    settlement dates extending to August 2010. Option contracts with a
    notional value of U.S $304.9 million and a carrying value of
    $16.4 million have been designated as a cash flow hedge for hedge
    accounting treatment under CICA Handbook Section 3865, "Hedges" ("Section
    3865"). These contracts are intended to reduce the foreign exchange risk
    with respect to anticipated purchases of U.S. dollar denominated goods
    and services, including goods purchased for resale ("hedged item"). As at
    August 1, 2009 all hedges were considered effective with no
    ineffectiveness recognized in income.

    The Company is also subject to foreign exchange risk on U.S. dollar
    denominated short-term investments pledged as collateral for letter of
    credit obligations issued under the Company's offshore merchandise
    purchasing program. As at August 1, 2009, there were swap contracts
    outstanding with a notional value of U.S. $70.0 million and a carrying
    value of $4.2 million, included in prepaid expenses and other assets.
    These contracts are short-term to match the duration of the outstanding
    obligations.

    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 is included on the consolidated
    statements of financial position in one of the following categories,
    depending on the derivative's maturity and value: prepaid expenses and
    other assets, other long-term assets, accrued liabilities or other long-
    term liabilities. Changes in fair value of those contracts designated as
    hedges are included in other comprehensive income ("OCI") for cash flow
    hedges to the extent the hedges continue to be effective. Amounts
    previously included in OCI are reclassified to net earnings in the same
    period in which the hedged item impacts net earnings.

    For the 13 and 26-week periods ended August 1, 2009, the Company recorded
    a gain of $2.9 million and $7.3 million, respectively relating to the
    translation or settlement of U.S. dollar denominated monetary items.

    Based on historic movements, volatilities in foreign exchange and
    management's current assessment of the financial markets, the Company
    believes a variation of +10% (appreciation of the Canadian dollar) and
    -10% (depreciation of the Canadian dollar) in foreign exchange rate
    against the U.S. dollar is reasonably possible over a 12 month period.
    The period end rate was 0.9281 U.S. dollar to Canadian dollar. Cash and
    short-term investments (other than those discussed above), derivative
    contracts that have not been designated as cash flow hedges, accounts
    receivable and accounts payable include U.S. dollar denominated balances
    which net to an insignificant balance, therefore, any changes in the
    U.S./Canadian dollar exchange rates would have an immaterial impact on
    net earnings.

    Interest rate risk

    From time to time the Company enters into interest rate swap contracts
    with Schedule I banks, to manage exposure to interest rate risks. As at
    August 1, 2009, the Company had no interest rate swap contracts in place.

    Interest rate risk reflects the sensitivity of the Company's financial
    condition to movements in interest rates. Financial assets and
    liabilities which do not bear interest or bear interest at fixed rates
    are classified as non-interest rate sensitive. Based on historic
    movements, volatilities in interest rates and management's current
    assessment of the financial markets, the Company believes a variation of
    +1%/-1% in the interest rates applicable to the Company's cash and short-
    term investments and restricted cash and investments are reasonably
    possible over a 12 month period.

    Cash and short-term investments and restricted cash and investments are
    subject to interest rate risk. The total subject to interest rate risk as
    at August 1, 2009 was $894.1 million. A movement in interest rate of
    +/- 1% would cause a variance in net earnings in the amount of
    $6.2 million.

    Fuel price risk

    The Company entered into a fuel derivative contract to manage the
    exposure to diesel fuel prices to help mitigate volatility in cash flow
    for the transportation service business. As at August 1, 2009 there was a
    fixed to floating rate swap contract outstanding for a notional volume of
    5.8 million litres and a carrying value of $0.5 million. This derivative
    contract has settlement dates extending to February 2010 and a portion
    has been designated as a cash flow hedge for hedge accounting treatment
    under Section 3865. Changes in the fair value of the effective portion of
    the designated component of the derivative contract that qualifies as a
    cash flow hedge is recognized in accumulated other comprehensive income.
    Upon maturity of the designated component of the swap contract, the
    effective gains and losses are recorded in net earnings. Any gain or loss
    in fair value relating to the ineffective portion is recognized
    immediately in net earnings.

    Classification and fair value of financial instruments

    The estimated fair values of financial instruments as at August 1, 2009,
    August 2, 2008 and January 31, 2009, are based on relevant market prices
    and information available at those dates. The following tables summarize
    the classification and fair value ("FV") of certain financial instruments
    as at August 1, 2009, August 2, 2008 and January 31, 2009 and the pre-tax
    change in fair value of those instruments during the 13 and 26-week
    periods of 2009 and 2008 with the offset included in either OCI or net
    earnings. The Company determines the classification of a financial
    instrument when it is originally recorded, based on the underlying
    purpose of the instrument. As a significant number of the Company's
    assets and liabilities, including inventories and capital assets, do not
    meet the definition of financial instruments, values in the tables below
    do not reflect the fair value of the Company as a whole.



    (in millions)
    -------------------------------------------------------------------------
                                                   As at     As at     As at
                      Balance Sheet             August 1,    May 2,  January
    Classification    Category                      2009      2009  31, 2009
    -------------------------------------------------------------------------

    Available
     for sale

    Short-term        Cash and short-term
     investments       investments(3)            $ 707.7   $ 639.1   $ 753.4
    Long-term         Other long-term
     investments       assets                        1.5       1.5       1.6
    -------------------------------------------------------------------------

    Held for trading

    Cash              Cash and short-term
                       investments                  74.3     105.9      66.4
    Cash and          Restricted cash and
     investments       investments(3)              113.1     128.4     144.8
    U.S. $ derivative Prepaid expenses &
     contracts         other assets                 20.5      64.5      91.1
    Cash              Other long-term assets         0.7       3.1       6.9
    Fixed price       Accrued
     energy contracts  liabilities                     -         -         -
    Commodity         Accrued
     derivative        liabilities                   1.2       0.1      (0.1)
     contracts
    -------------------------------------------------------------------------


                                          13-week Period     26-week Period
                                          Ended August 1,    Ended August 1,
                                               2009               2009
                                       --------------------------------------
    (in millions)                          Pre-tax change in FV included in
    -------------------------------------------------------------------------

                      Balance Sheet                  Net                 Net
    Classification    Category             OCI  earnings       OCI  earnings
    -------------------------------------------------------------------------

    Available
     for sale

    Short-term        Cash and
     investments       short-term
                       investments(3)  $   0.2   $     -   $   0.1   $     -
    Long-term         Other long-term
     investments       assets                -         -         -       0.1
    -------------------------------------------------------------------------

    Held for trading

    Cash              Cash and short-term
                       investments           -         -         -         -
    Cash and          Restricted cash and
     investments       investments(3)        -         -         -         -
    U.S. $ derivative Prepaid expenses &
     contracts         other assets       48.7      (4.7)     76.8      (6.2)
    Cash              Other long-term
                       assets                -         -         -         -
    Fixed price       Accrued
     energy contracts  liabilities           -         -         -         -
    Commodity         Accrued
     derivative        liabilities        (0.2)     (0.9)     (0.2)     (1.1)
     contracts
    -------------------------------------------------------------------------
                                       $  48.7   $  (5.6)  $  76.7   $  (7.2)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (in millions)
    -------------------------------------------------------------------------
                                                   As at     As at     As at
                      Balance Sheet             August 2,    May 3, February
    Classification    Category                      2008      2008   2, 2008
    -------------------------------------------------------------------------

    Available
     for sale

    Short-term        Cash and
     investments       short-term
                       investments(3)            $ 725.3   $ 690.9   $ 806.9
    Long-term         Other long-term
     investments       assets                        2.2       2.2       2.6
    -------------------------------------------------------------------------

    Held for trading

    Cash              Cash and
                       short-term
                       investments                  57.7      75.5      64.7
    Cash and          Restricted
     investments       cash and
                       investments(3)                2.6       7.0       5.2
    U.S. $ derivative Prepaid expenses
     contracts         & other assets
                       (Accrued
                       liabilities)                  7.9       3.9      (0.2)
    Cash              Other long-term
                       assets                          -         -         -
    Fixed price       Accrued
     energy contracts  liabilities                     -         -      (0.1)
    Commodity         Accrued
     derivative        liabilities                     -         -         -
     contracts
    -------------------------------------------------------------------------


                                         13-week Period      26-week Period
                                         Ended August 2,     Ended August 2,
                                              2008                2008
                                       --------------------------------------
    (in millions)                          Pre-tax change in FV included in
    -------------------------------------------------------------------------

                      Balance Sheet                  Net                 Net
    Classification    Category             OCI  earnings       OCI  earnings
    -------------------------------------------------------------------------

    Available
     for sale

    Short-term        Cash and
     investments       short-term
                       investments(3)  $     -   $     -   $   0.1   $     -
    Long-term         Other long-term
     investments       assets                -         -         -       0.4
    -------------------------------------------------------------------------

    Held for trading

    Cash              Cash and
                       short-term
                       investments           -         -         -         -
    Cash and          Restricted
     investments       cash and
                       investments(3)        -         -         -         -
    U.S. $ derivative Prepaid expenses
     contracts         & other assets
                       (Accrued
                       liabilities)       (4.1)      0.1      (7.5)     (0.6)
    Cash              Other long-term
                       assets                -         -         -         -
    Fixed price       Accrued
     energy contracts  liabilities           -         -         -      (0.1)
    Commodity         Accrued
     derivative        liabilities           -         -         -         -
     contracts
    -------------------------------------------------------------------------
                                       $  (4.1)  $   0.1   $  (7.4)  $  (0.3)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (3) Interest revenue related to short-term investments is disclosed in
        Note 5 Long-term Obligations.

    All other assets that are financial instruments, excluding long-term
    notes discussed below, have been classified as "loans and receivables"
    and all other financial instrument liabilities have been classified as
    "other liabilities" and are measured at amortized cost on the
    consolidated statements of financial position. The carrying value of
    these financial instruments, with the exception of long-term obligations,
    approximates fair value. Long-term obligations with a carrying value of
    $359.1 million, including the portion due within one year, but excluding
    all capital lease obligations, have a fair value as at August 1, 2009 of
    $359.0 million. The fair value of the Company's proportionate share of
    long-term debt of joint ventures, with a carrying value of $59.1 million
    as at August 1, 2009, was calculated using a valuation technique based on
    assumptions that are not supported by observable market prices or rates.
    The term and interest rate applicable to each joint venture's debt
    together with management's estimate of a risk-adjusted discount rate were
    used to determine the fair value of $58.9 million. The fair value of the
    Company's medium term notes, with a carrying value of $300.0 million as
    at August 1, 2009, is $300.1 million and was determined with reference to
    observable market prices and rates.

    Included in other long-term assets on the consolidated statement of
    financial position is an investment in long-term notes, with an original
    cost of $3.0 million and a fair value as at August 1, 2009 of
    $1.5 million, which has been classified as available for sale. The fair
    value as at August 1, 2009, has been calculated using a valuation
    technique based on assumptions that are not supported by observable
    market prices or rates. Information disclosed in the Master Asset Vehicle
    2 (MAV2) trust indenture together with management's estimates based
    thereon regarding interest rate, risk-adjusted discount rate and expected
    term of the various classes of restructured notes, resulted in a Nil and
    $0.1 million reduction for the 13 and 26-week periods ended August 1,
    2009 respectively, in the investment's fair value. The Company does not
    intend to dispose of the investment within a year.
    






For further information:

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


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890