Sears 2014 Annual Report Download - page 44

44
Sears Canada’s selling and administrative expense rate was 28.9% in 2014 and 28.6% in 2013.
Impairment Charges
We recorded impairment charges of $15 million in 2014 and $13 million in 2013 related to long-lived assets.
Impairment charges recorded are further described in Note 13 of Notes to Consolidated Financial Statements.
Gain on Sales of Assets
We recorded total gains on sales of assets of $538 million in 2013, which included gains on sales of assets of
$357 million recognized on the surrender and early termination of the leases of five properties operated by Sears
Canada, for which Sears Canada received $381 million ($400 million Canadian) in cash proceeds, and $180 million
recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for
which Sears Canada received $184 million ($191 million Canadian) in cash proceeds. We did not have any similar
transactions in 2014 that were recorded as gain on sales of assets.
Operating Income (Loss)
Sears Canada recorded operating loss of $166 million and operating income of $364 million in 2014 and 2013,
respectively, and was affected by the significant items noted above and de-consolidation on October 16, 2014.
2013 Compared to 2012
Revenues and Comparable Store Sales
Sears Canada’s revenues decreased $514 million for 2013 as compared to the same period last year and
included a $157 million decrease due to the impact of exchange rates during the year. On a Canadian dollar basis,
revenues decreased by $357 million. Revenues primarily decreased as a result of a new licensing arrangement
related to the SHIPS business, which accounted for approximately $150 million of the decline. Revenues also
decreased as a result of lower comparable store sales, which accounted for approximately $85 million of the decline,
and the closure of four Full-line stores, which accounted for approximately $70 million of the decline. Comparable
store sales declined 2.7%, which was primarily driven by declines in home furnishings, fitness, home decor,
electronics, home appliances and apparel and accessories. Fiscal 2012 also benefited from revenues of
approximately $35 million due to the 53rd week.
Gross Margin
Gross margin dollars decreased $219 million in 2013 to $1.0 billion and included a $42 million decrease due to
the impact of exchange rates. Gross margin decreased $177 million on a Canadian dollar basis, and included charges
of $1 million for markdowns recorded in connection with store closings announced during 2013. Sears Canada’s
gross margin rate decreased 190 basis points to 26.8%, in 2013 from 28.7% in 2012, due to an increase in inventory
reserve requirements.
Selling and Administrative Expenses
For 2013, Sears Canada’s selling and administrative expenses decreased $107 million, and included a decrease
of $45 million due to the impact of exchange rates. On a Canadian dollar basis, selling and administrative expenses
decreased by $62 million primarily due to decreases in advertising and payroll expenses. Selling and administrative
expenses for 2013 included expenses of $71 million related to store closings and severance. 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.
Sears Canada’s selling and administrative expense rate was 28.6% in 2013 and 27.7% in 2012 and increased
primarily due to decreased leverage as a result of the above noted decline in revenues.