Sears 2010 Annual Report Download - page 33

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Sears Canada
Sears Canada, a consolidated, 92%-owned subsidiary of Sears, conducts similar retail operations as Sears
Domestic. Sears Canada results and key statistics were as follows:
millions, except for number of stores 2010 2009 2008
Merchandise sales and services ........................................... $4,796 $4,628 $5,236
Cost of sales, buying and occupancy ....................................... 3,333 3,133 3,592
Gross margin dollars ................................................... 1,463 1,495 1,644
Margin rate .......................................................... 30.5% 32.3% 31.4%
Selling and administrative ............................................... 1,144 1,048 1,189
Selling and administrative expense as a percentage of revenues ................. 23.9% 22.6% 22.7%
Depreciation and amortization ............................................ 100 102 119
Gain on sales of assets .................................................. (14) (45) (31)
Total costs and expenses ............................................ 4,563 4,238 4,869
Operating income ...................................................... $ 233 $ 390 $ 367
Number of:
Full-line stores .................................................... 122 122 122
Specialty stores .................................................... 361 280 266
Total Sears Canada stores ............................................... 483 402 388
2010 Compared to 2009
Revenues
Sears Canada’s revenues increased 3.6% in 2010. The increase in total revenues of $168 million includes a
$433 million increase due to the impact of exchange rates. On a Canadian dollar basis, revenues decreased by
$265 million, primarily reflecting a comparable store sales decrease of 4.0%. Comparable store sales decreases
were more pronounced in the appliances and apparel categories. We believe the decline in comparable store sales
is mainly the result of a continued tightening in consumer discretionary spending resulting from falling consumer
confidence levels, as well as increased cross-border shopping due to the effect of a strong Canadian dollar
relative to the U.S. dollar.
Gross Margin
Gross margin dollars decreased $32 million to $1.5 billion for 2010 and include a $142 million increase due
to the impact of exchange rates. Gross margin decreased $174 million on a Canadian dollar basis as a result of
lower overall sales and a decline in margin rate. Sears Canada’s margin rate decreased to 30.5% in 2010 from
32.3% in 2009 due to price compression in the appliance and electronics categories, as well as an increase in
promotional and clearance markdowns related to a challenging economic environment.
Selling and Administrative Expenses
Sears Canada’s selling and administrative expenses increased $96 million to $1.1 billion in 2010 and
includes a $97 million increase due to the impact of exchange rates. On a Canadian dollar basis, selling and
administrative expenses were flat. Sears Canada’s selling and administrative expense rate was 23.9% in 2010 and
22.6% in 2009, and increased primarily as a result of lower expense leverage given lower overall sales on a
Canadian dollar basis.
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