Sears 2012 Annual Report Download - page 39

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decreased by $49 million primarily due to decreases in advertising. Selling and administrative expenses for 2012
included expenses of $20 million related to store closings and severance, $3 million related to pension settlements
and $3 million of transaction costs associated with strategic initiatives. Selling and administrative expenses for 2011
included severance expenses of $18 million.
Sears Canada’s selling and administrative expense rate was 27.7% in 2012 and 27.0% in 2011 and increased
primarily due to the above noted decline in revenues.
Impairment Charges
We recorded impairment charges of $295 million in 2012 related to goodwill. We did not record any such
impairments in 2011. Impairment charges recorded are further described in Note12 of Notes to Consolidated
Financial Statements.
Gain on Sales of Assets
We recorded a total gain on sales of assets of $170 million in 2012 which included a gain of $163 million
recognized on the surrender and early termination of the leases on three properties under an agreement with The
Cadillac Fairview Corporation Limited for which Sears Canada received $170 million Canadian in cash proceeds. In
connection with this transaction, we surrendered substantially all of our rights and obligations under our preexisting
lease agreements and agreed to surrender each of the premises in six months from the date of closing.
Operating Loss
Sears Canada recorded an operating loss of $187 million and $20 million in 2012 and 2011, respectively.
Operating loss in 2012 included expenses of $20 million related to store closings and severance, $3 million related
to pension settlements and $3 million of transaction costs associated with strategic initiatives, as well as an
impairment charge of $295 million and a gain on sales of assets of $163 million in 2012. Operating loss in 2011
included expenses related to store closings and severance of $18 million. The increase in operating loss was
primarily due to the decline in sales, partially offset by the gain on sales of assets noted above as well as the
decrease in selling and administrative expenses.
2011 Compared to 2010
Revenues and Comparable Store Sales
Sears Canada's revenues decreased by $163 million in 2011 to $4.6 billion and included a $171 million
increase due to the impact of exchange rates. On a Canadian dollar basis, revenues decreased by $334 million, due
to a 7.7% decline in comparable store sales primarily attributable to sales declines in the hardlines and home
categories, with industry-wide price compression and aggressive competition affecting sales in major appliances,
electronics and home décor products. Revenue in the apparel and accessories categories also experienced declines
primarily in women's wear and men's wear.
Gross Margin
Total gross margin dollars decreased $129 million to $1.3 billion for 2011 and included a $51 million increase
due to the impact of exchange rates. Gross margin decreased $180 million on a Canadian dollar basis primarily as a
result of a decline in gross margin rate. Sears Canada's margin rate decreased 170 basis points to 28.8% in 2011,
from 30.5% in 2010, as a result of clearing inventory, due to an enhanced focus on improving inventory
productivity.
Selling and Administrative Expenses
Sears Canada's selling and administrative expenses increased $107 million to $1.3 billion in 2011, and
included an increase of $42 million due to the impact of exchange rates and severance expenses of $18 million
recorded during 2011. On a Canadian dollar basis, selling and administrative expenses increased by $65 million
primarily due to increased investment in strategic projects and the above noted severance expense.