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Sears Canada '02 earnings fall 44.5% despite stronger 4Q

By Furniture Today Staff -- Furniture Today, February 2, 2003

Toronto — Net earnings for Sears Canada fell 44.5% in 2002 to C$52.2 million from C$94.1 million last year, as total revenues for the 52 weeks ended Dec. 28 slipped 2.8% to C$6.5 billion. Merchandise sales for Canada's largest retailer decreased 2.4% while same-store sales were off 4.3%.

The picture would have been much darker without a somewhat stronger fourth quarter, although it too saw total revenues sag 3.6% to C$2.1 billion as merchandise sales dropped 3.9% and same-store sales declined 4.9%. Still, fourth-quarter net earnings of C$143.4 million were almost double that of the year before.

The biggest drain on Sears Canada's 2002 profits was the conversion of its seven Eaton's stores to the Sears banner, for which the company took a C$180 million pretax charge.

"Given the general malaise evident throughout much of the industry, we are delighted with our fourth-quarter performance," said Chairman and Chief Executive Officer Mark Cohen. "Although sales were soft, gross margins improved by 513 basis points. Gross margin dollars increased by 11% or C$70.6 million. As a result, operating profit improved.... Inventory levels were favorable at the end of the quarter, coming in at C$110 million or 12.7% below last year."

Without providing figures, he said several business sectors saw sales increases in the fourth quarter, including the company's dealer store network, which sells mostly furniture, appliances and other big-ticket items. Also up were major appliance sales, travel and repair services.

Sears expects 2003 operating earnings to show a 15% improvement over 2002, Cohen said, with same-store sales up 2%.

"We continue to believe the general economic recovery may be problematic in 2003," he said. "Closely managing our business will enable Sears Canada to continuously improve profit performance with or without the benefit of a rising economy."

Sears Canada(a)
Earnings per share are fully diluted, and all figures in parentheses are losses or declines.
13 weeks ended 12/28	2002	2001	Change
(a) In Canadian dollars. (b) Includes a C$6.3 million pretax gain on the sale of a call center in both periods, a C$13.7 million pretax retail restructuring charge in both periods and a C$2.1 million pretax charge for catalog outsourcing in both periods. The 2002 year also includes a C$180 million pretax charge for the Eatons conversion, a C$3.6 million pretax gain on the sale of an airplane and a C$21.8 million income tax benefit. (c) Includes an C$8.3 million pretax gain on the sale of a distribution facility in both periods. The 2001 quarter also includes a C$1.7 million pretax gain on the closing of 14 auto centers and the 2001 year also includes a C$2.8 million pretax charge on the cost of closing the 14 auto centers.
Revenues	C$2,056,800,000	C$2,132,800,000	(3.6%)
Operating income	209,400,000	195,000,000	7.4%
Net income	(b)143,400,000	(c)78,600,000	82.4%
Earnings per share	1.34	0.73	83.6%
52 weeks ended 12/28	2002	2001	Change
Revenues	C$6,535,900,000	C$6,726,400,000	(2.8%)
Operating income	428,000,000	405,500,000	5.5%
Net income	(b)52,200,000	(c)94,100,000	(44.5%)
Earnings per share	0.49	0.88	(44.3%)

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