Sears 2007 Annual Report Download - page 23

payable system, as well as a new common general ledger and stock ledger, for Kmart and Sears
Domestic based on enhancements made to Kmart’s existing systems and processes. The systems
conversion establishes a common set of processes and systems for Sears Domestic and Kmart.
Certain of these initiatives and actions benefited our fiscal 2007 operating results, and the impact of such items is
reflected in our 2007 operating results as presented in the below “Results of Operations” section. Other initiatives
represent investments management has made with the belief that they further Holdings’ longer term pursuit of
our mission: profitably building long-term relationships and gaining prominence in the retail industry.
Fiscal Year
Effective March 23, 2005, we changed our fiscal year end from the last Wednesday in January to the
Saturday closest to January 31st. In fiscal 2006, the Saturday closest to January 31st was February 3, 2007 and, as
a result, fiscal 2006 consisted of 53 weeks. Both fiscal 2007 and fiscal 2005 consisted of 52 weeks. Unless
otherwise stated, references to years in this report relate to fiscal years rather than to calendar years. The
following fiscal periods are presented in this report.
Fiscal year Ended Weeks
2007 February 2, 2008 52
2006 February 3, 2007 53
2005 January 28, 2006 52
Sears Canada’s fiscal year end has historically been the Saturday closest to December 31st and accordingly,
we had consolidated Sears Canada’s results on a one-month lag. During the fourth quarter of 2007, Sears Canada
changed its fiscal year end from the Saturday nearest December 31st to the Saturday nearest January 31st. The
change in Sears Canada’s year end is considered a preferable change in accounting principle as it allows a full
seasonal cycle, including the liquidation of holiday merchandise, for Sears Canada to be included in the results of
Holdings. Furthermore, Sears Canada’s fiscal year end is now aligned with the fiscal year end of Holdings and its
results are no longer accounted for on a one-month lag. As required by SFAS No. 154, “Accounting Changes and
Error Corrections—A Replacement of Accounting Principles Board (“APB”) Opinion No. 20 and SFAS No. 3,”
this change has been retrospectively applied to all prior year amounts included in the financial statements of
Sears Canada for fiscal 2006 and 2005. See Note 3 of Notes to Consolidated Financial Statements for further
explanation of this change.
RESULTS OF OPERATIONS
In the results of operations section that follows, results for fiscal 2005 are set forth on both a reported and
pro forma basis. This presentation reflects the fact that the reported results for Holdings prior to the March 24,
2005 Merger reflect only Kmart’s results. Accordingly, to facilitate an understanding of our trends and on-going
performance, we have presented pro forma results below for fiscal 2005 in addition to the reported results for that
year. The pro forma results adjust the reported amounts for fiscal 2005 to give effect to the Merger as if it had
occurred at the beginning of fiscal 2005. Thus, the pro forma results include both Kmart and Sears results for the
entire fiscal 2005 period. A reconciliation of pro forma amounts to reported amounts has been included under the
heading “Pro Forma Reconciliation.”
References to comparable store sales amounts within the following discussion include sales for all stores
operating for a period of at least 12 full months, including remodeled and expanded stores, but excluding store
relocations and stores that have undergone format changes. Comparable store sales results for fiscal 2007 were
calculated based on the 52-week period ended February 2, 2008 as compared to the comparable 52-week period
in the prior year.
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