Sears 2013 Annual Report Download - page 26

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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. Domestic comparable store sales amounts include sales from sears.com and
kmart.com shipped directly to customers. These online sales resulted in a benefit of approximately 60 basis points and 30
basis points, respectively, for 2013 and 2012. In addition, domestic comparable store sales have been adjusted for the
change in the unshipped sales reserves recorded at the end of each reporting period, which resulted in a positive impact of
approximately 10 basis points for 2013 and no impact in 2012.
As previously noted, fiscal 2013 was comprised of the 52-week period ended February 1, 2014, while fiscal 2012
was comprised of the 53-week period ended February 2, 2013. This one week shift had no impact on the domestic
comparable store sales results reported herein due to the fact that for purposes of reporting domestic comparable store
sales results for 2013, weeks one through 52 for fiscal 2013 have been compared to weeks two through 53 for fiscal year
2012, thereby eliminating the impact of the one week shift. Domestic comparable store sales results for 2012 were
calculated based on the 52-week period ended January 26, 2013 as compared to the comparable 52-week period in the
prior year.
2013 Compared to 2012
Net Loss Attributable to Holdings' Shareholders
We recorded a net loss attributable to Holdings' shareholders of $1.4 billion ($12.87 loss per diluted share) and
$930 million ($8.78 loss per diluted share) for 2013 and 2012, respectively. Our results for 2013 and 2012 were
affected by a number of significant items. Our net loss as adjusted for these significant items was $700 million
($6.60 loss per diluted share) for 2013 and $266 million ($2.51 loss per diluted share) for 2012. The increase in net
loss for the year reflected a decline in gross margin, which resulted from both a decline in revenues as well as a
decline in gross margin rate of 220 basis points, partially offset by a decrease in selling and administrative expenses.
In addition to our net loss from continuing operations determined in accordance with GAAP, for purposes of
evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization ("Adjusted EBITDA") measurement as well as Adjusted Earnings per Share ("Adjusted EPS").
Adjusted EBITDA is computed as net loss attributable to Sears Holdings Corporation appearing on the
Statements of Operations excluding income (loss) attributable to noncontrolling interests, income tax expense,
interest expense, interest and investment income, other income (loss), depreciation and amortization and gain on
sales of assets. In addition, it is adjusted to exclude certain significant items as set forth below. Our management
uses Adjusted EBITDA to evaluate the operating performance of our businesses, as well as executive compensation
metrics, for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole
basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.
While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator
of ongoing operating performance, and useful to investors, because:
• EBITDA excludes the effects of financings and investing activities by eliminating the effects of interest and
depreciation costs;
• Management considers gains/(losses) on the sale of assets to result from investing decisions rather than
ongoing operations; and
• Other significant items, while periodically affecting our results, may vary significantly from period to
period and have a disproportionate effect in a given period, which affects comparability of results.
Adjustments to EBITDA include impairment charges related to fixed assets and intangible assets, pension
settlements, closed store and severance charges, domestic pension expense, transaction costs, hurricane
losses and the SHO separation. We have adjusted our results for these items to make our statements more
comparable and therefore more useful to investors as the items are not representative of our ongoing
operations and reflect past investment decisions.