Sears Canada net earnings plunge 58.3% despite 5.8% sales increase
By Michael J. Knell -- Furniture Today, January 27, 2002
TORONTO — Sears Canada, this country's largest single retailer, said sales in 2001 climbed 5.8%, but rising costs and a generally weak Canadian economy caused a 58.3% drop in net earnings.
Total revenues for the 52-week period ended Dec. 29 were C$6.7 billion, compared to C$6.4 billion in the previous year. Merchandise sales for the year increased 5.4% while same-store sales slipped 0.4%.
Net earnings were C$94.1 million, compared to C$225.8 million in 2000. Earnings per share dropped to 88 Canadian cents from C$2.11.
With 37 free-standing furniture and appliance stores, and furniture and bedding departments in two of its seven Eaton's stores and in most of its 118 full-line units, Sears is Canada's largest furniture retailer. Historically, furniture and bedding account for between 8% and 10% of overall sales.
In the fourth quarter, net earnings were C$78.6 million compared to C$120.2 million in the previous year's comparable quarter, a decline of 34.6%. But revenues inched up 1.1% to C$2.133 billion from C$2.109 billion in the previous year's last quarter.
Mark Cohen, chairman and chief executive officer, said 2001 results were achieved in part because of cost containment, including an almost 20% cut in staffing.
"We recognized early in the year that we were in a period of economic uncertainty and began taking appropriate measures, focusing on inventory management and reducing expenses and capital expenditures," he said.
"Our inventory levels at the end of the year are C$151 million less than last year," he continued. "Our capital expenditures for the year were C$143 million, compared to planned expenditures of C$200 million. Our total debt net of cash is down C$88 million from last year."
Cohen said Sears is well positioned to improve performance in 2002, although he doesn't expect an immediate uptick in the Canadian economy.
"We believe the economy will remain difficult during the first part of the year, with some demonstration of recovery in the last half of the year," he said. "We believe that the strong actions we have taken during 2001 position us extremely well to benefit from any economic recovery. We expect our 2002 earnings will show important improvement with or without the benefit of a rising economy."
Sears, Roebuck & Co. of Chicago is Sears Canada's largest shareholder.
| 13 weeks ended 12/29 | 2001 | 2000 | Change |
|---|---|---|---|
| Revenues | C$2,132,800,000 | C$2,108,800,000 | 1.1% |
| Operating income | 195,000,000 | 205,700,000 | (5.2%) |
| Net income (b) | 78,600,000 | 120,200,000 | (34.6%) |
| Earnings per share | 0.73 | 1.12 | (34.8%) |
| 52 weeks ended 12/29 | 2001 | 2000 | Change |
| Revenues | C$6,726,400,000 | C$6,355,800,000 | 5.8% |
| Operating income | 405,500,000 | 517,800,000 | (21.7%) |
| Net income (b) | 94,100,000 | 225,800,000 | (58.3%) |
| Earnings per share | 0.88 | 2.11 | (58.3%) |
| (a) In Canadian dollars. (b) Includes pretax gains of C$10 million in the 2001 13 weeks, C$5.5 million in the 2001 52 weeks and C$12.5 million in both 2000 periods. | |||
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