Sears 2015 Annual Report Download - page 34

indefinite-life assets associated with the property sold in the transaction with Seritage. As a result, our effective tax
rate for 2015 was a benefit of 18.6% compared to expense of 7.4% for 2014.€Also, the application of the
requirements for accounting for income taxes, after consideration of our valuation allowance, causes a significant
variation in the typical relationship between income tax expense and pretax income.€Our tax rate in 2015 continues
to reflect the effect of not recognizing the benefit of current period losses in certain domestic and foreign
jurisdictions where it is not more likely than not that such benefits would be realized. In addition, 2015 was
negatively impacted by foreign branch taxes and state income taxes.
The 2014 rate was negatively impacted by a valuation allowance established on Sears Canada’s deferred tax
assets in the third quarter, prior to de-consolidation, and increased foreign taxes in Puerto Rico resulting from a new
tax law change, which became effective during the second quarter of 2014. These items were partially offset by state
audit settlements and statute expirations. In addition, the 2014 rate was favorably impacted by the book to tax
difference for the original issue discount relating to the $625 million 8% senior unsecured notes issued in November
2014, which resulted in the creation of a deferred tax liability through additional paid-in capital and a valuation
allowance reversal through continuing operations.
2014 Compared to 2013
Net Loss Attributable to Holdings' Shareholders
We recorded a net loss attributable to Holdings' shareholders of $1.7 billion ($15.82 loss per diluted share) and
$1.4 billion ($12.87 loss per diluted share) for 2014 and 2013, respectively. Our results for 2014 and 2013 were
affected by a number of significant items. Our net loss as adjusted for these significant items was $830 million
($7.81 loss per diluted share) for 2014 and $792 million ($7.46 loss per diluted share) for 2013. The increase in net
loss for the year primarily reflected a decline in gross margin, which resulted from both a decline in revenues, as
well as a decline in gross margin rate, partially offset by a decrease in selling and administrative expenses.
Revenues and Comparable Store Sales
Revenues decreased $5.0 billion, or 13.8%, to $31.2 billion in 2014, as compared to revenues of $36.2 billion
in 2013. Much of the decline related to actions we took during 2014 to streamline our operations and focus on our
transformation into a member-centric retailer. The revenue decrease included a decrease of $1.7 billion associated
with Sears Canada, which was de-consolidated in October 2014, $1.3 billion from the separation of the Lands’ End
business, which was completed on April 4, 2014, and $1.3 billion in less revenue from fewer Kmart and Sears Full-
line stores. Revenues in 2014 also declined as a result of lower domestic comparable store sales, which accounted
for $421 million of the decline. Finally, we also experienced a revenue decline in our Home Services business
during 2014, as well as a decline in delivery revenues, which when combined, accounted for $145 million of the
decline and a decline in our revenues from SHO of $119 million.
Sears Canada's revenue decline of $1.7 billion was predominantly driven by the de-consolidation of Sears
Canada, which occurred on October 16, 2014 and accounted for $1.3 billion of the revenue decline. Revenues also
declined due to an 8.0% decline in comparable store sales, which accounted for an additional $161 million of the
decline, as well as the effect of having fewer stores in operation, which accounted for $97 million of the decline.
Sears Canada experienced declines in the Home Services business, which accounted for $27 million of the decline.
Revenues also included a decrease of $125 million due to foreign currency exchange rates.
Domestic comparable store sales declined 1.8%, comprised of decreases of 1.4% at Kmart and 2.1% at Sears
Domestic. The decline at Kmart reflects positive performance in several categories, most notably apparel and
jewelry, offset by declines in the consumer electronics and grocery & household categories. Excluding the impact of
the consumer electronics and grocery & household goods businesses, comparable store sales would have increased
0.8% for the year. Excluding the impact of consumer electronics, Sears Domestic comparable store sales would have
decreased 0.5%, reflecting improved performance in the home appliance and mattress categories offset by declines
in Sears Auto Centers, apparel and lawn & garden.
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