Sears 2009 Annual Report Download - page 36

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result of lower overall sales. Sears Canada’s gross margin rate increased to 32.3% in fiscal 2009 from 31.4% in
fiscal 2008 primarily as a result of improved inventory management.
Selling and Administrative Expenses
Sears Canada’s selling and administrative expenses declined $141 million to $1 billion in 2009 and include
severance expenses of $8 million recorded during the year. The decrease in expenses primarily reflects a
reduction in advertising expenses during fiscal 2009, as well as a decline of $27 million due to the impact of
exchange rates. Sears Canada’s selling and administrative expense rate was 22.6% in fiscal 2009 and 22.7% in
fiscal 2008, and decreased primarily as a result of the noted decline in selling and administrative expenses.
Gains on Sales of Assets
Sears Canada recorded total gains on sales of assets of $45 million during 2009 and $31 million in fiscal
2008. During fiscal 2009, Sears Canada recognized a previously deferred $44 million gain related to the August
2007 sale of its former headquarters. During fiscal 2008, Sears Canada benefited from a $32 million gain from
the sale of its Calgary downtown full-line store.
Operating Income
Sears Canada’s operating income increased $23 million to $390 million in fiscal 2009. The increase in
operating income includes an $18 million decline due to the impact of foreign currency exchange rates. The
increase of $41 million on a Canadian dollar basis reflects the above noted decreases in selling and
administrative expenses and increase in gains on sales of assets, which were partially offset by a decrease in
gross margin dollars given lower overall sales.
Fiscal 2008 Compared to Fiscal 2007
Total Revenues
Sears Canada’s total revenues decreased by $366 million, or 6.5%, to $5.2 billion for fiscal 2008. The
decrease in total revenues includes a $96 million decline due to the impact of unfavorable exchange rates. On an
equivalent Canadian dollar basis, revenues decreased by $270 million, primarily reflecting a decrease in Sears
Canada’s sales at their Full-line, Home, Outlet, and Direct formats. These declines were partially offset by an
increase in revenues from services and credit programs.
Gross Margin
Total gross margin dollars decreased $111 million to $1.6 billion in fiscal 2008 and include a $30 million
decline due to the impact of unfavorable exchange rates during the year. Gross margin decreased $81 million on
a Canadian dollar basis primarily due to the impact of lower overall sales for the year. For fiscal 2008, Sears
Canada’s gross margin rate increased to 31.4% from 31.3% in fiscal 2007 due mainly to improved inventory
management.
Selling and Administrative Expenses
Sears Canada’s selling and administrative expenses declined $44 million to $1.2 billion in fiscal 2008. The
decline in selling and administrative expenses includes a decline of $24 million due to the impact of exchange
rates during the quarter. The remaining decline is mainly due to Sears Canada’s continued efforts to reduce
advertising and payroll and benefits expenses. Selling and administrative expenses for fiscal 2007 include a $27
million curtailment gain recorded in connection with changes made to Sears Canada’s post-retirement benefit
plans.
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