Sears 2013 Annual Report Download - page 44

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Operating Income (Loss)
Sears Canada recorded operating income of $364 million and an operating loss of $187 million in 2013 and
2012, respectively. Operating income in 2013 included expenses related to store closings, severance and impairment
charges, as well as gains on sales of assets which aggregated to operating income of $452 million. Operating loss in
2012 included expenses related to store closings, severance and pension settlements, transaction costs associated
with strategic initiatives and goodwill impairment charges, as well as a gain on sales of assets which aggregated to
an operating loss of $158 million. Excluding these items, Sears Canada would have recorded an operating loss of
$88 million in 2013 compared to an operating loss of $29 million in 2012. Operating loss increased in 2013 due to
the decline in margin, partially offset by a decline in selling and administrative expenses.
2012 Compared to 2011
Revenues and Comparable Store Sales
Sears Canada’s revenues decreased $323 million for 2012 as compared to the same period last year and
included a $37 million decrease due to the impact of exchange rates during the year. On a Canadian dollar basis,
revenues decreased by $286 million predominately due to a 5.6%, or approximately $185 million, decrease in
comparable store sales primarily due to sales decreases in the tools, lawn and garden, electronics, bed and bath,
women's apparel and menswear categories, partially offset by an increase in major appliances. These declines were
partially offset by the inclusion of approximately $35 million of revenues recorded in the 53rd week of 2012.
Gross Margin
Gross margin dollars decreased $99 million in 2012 to $1.2 billion and included an $11 million decrease due to
the impact of exchange rates. Gross margin decreased $88 million on a Canadian dollar basis. Sears Canada’s gross
margin rate decreased 10 basis points to 28.7%, in 2012 from 28.8% in 2011, due to decreases in the fitness and
recreation, children's wear, jewelry, accessories and luggage and footwear categories.
Selling and Administrative Expenses
For 2012, Sears Canada’s selling and administrative expenses decreased $59 million, and included a decrease
of $10 million due to the impact of exchange rates. On a Canadian dollar basis, selling and administrative expenses
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 Note 12 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 $171 million ($170 million Canadian) in
cash proceeds.