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Fourth qtr. revenues flat for Sears Canada

By Michael J. Knell -- Furniture Today, February 8, 2004

TORONTO — Sears Canada, the country's largest retailer and No. 1 furniture and bedding merchant, said fourth-quarter revenues remained virtually flat with last year's final period at C$2 billion, as earnings dropped 32.4% to C$96.9 million.

Excluding non-comparable items, earnings in the quarter rose 7.7% to C$102.6 million. Same-store sales dropped 1.3%.

The latest quarter, ended Jan. 3, 2004, included 14 weeks, one week more than the previous year's quarter. On a comparable-week basis, total revenues fell 4.7%.

For the year, revenues were down 4.8% to C$6.2 billion, and down 5.9% on a comparable-week basis. Earnings, again excluding non-comparable items, were C$140.9 million, up 1.6% from C$138.7 million the previous year. Same-store sales were off 4.6%.

Including non-comparable items, net income jumped 158% to C$134.7 million. The 2003 year included 53 weeks, compared with 52 weeks for the 2002 year.

"We are very pleased with our results in the quarter," said Mark Cohen, chairman and CEO. "Although total sales were negative, largely a result of a very challenging November, sales significantly improved in December. While gross margins were under pressure, strong expense disciplines enabled us to improve our operating earnings by almost 8% in the quarter compared to last year."

He said 2003 results weren't up to expectations, but that operating earnings improved as a result of controls on expenses and inventories.

"Expenses for the year were reduced by more than C$90 million from the previous year," Cohen said. "Gross margins improved by 40 basis points. Inventory levels ended on plan and are substantially more current than a year ago."

Sears Canada has 48 Sears Home stores, and bedding aisles in almost all its 122 department stores. Historically, furniture and bedding accounts for between 10% and 12% of total sales. The company could open five home stores this year.

Cohen is looking for some improvements in performance in 2004. "We believe our underlying sales trends have begun to improve," he said. "Comparable-store sales for 2004 are planned to increase at a low single-digit rate…. Operating income is expected to increase at a mid-teen rate."

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