Sears Canada 4Q profits down sharply as same-store sales drop 7.4%
Michael J. Knell -- Furniture Today, February 24, 2012
TORONTO — The critical holiday season was no boon to Sears Canada as all four key business metrics - sales, earnings, same-store sales and EBITDA - were down sharply during the fourth quarter of its now concluded fiscal year, which also saw the multi-channel retailer fall back in the red.
The company reported revenue of C$1.37 billion for the 13-week period ending Jan. 28, down 6.4% from the comparable period a year earlier. Same store sales decreased 7.4%.
Net earnings were C$38.7 million or 36 cents per share, less than half the C$82.7 million or 77 cents per share posted a year ago. Meanwhile, EBITDA (earnings before interest, taxes, depreciation and amortization) for the period fell to C$98.5 million from C$132.6 million during the comparable period.
Total revenues for the fiscal year that also ended on Jan. 28 were C$4.62 billion, down 6.5% from C$4.94 billion the previous year.
Sears Canada said the net loss for the year was C$60.1 million or 58 cents per share, reversing last year's net earnings of C$115.2 million or C$1.97 per share.
EBITA fell by almost two-thirds to C$110.8 million from C$293.3 million. However, the company noted that cash flow was up 19.2% to C$85 million, from last year's C$71.3 million.
Calvin McDonald, who was named president and CEO of Sears Canada last summer, suggested that the company is set to reverse its fortunes.
"While we are disappointed with our performance for 2011, including the fourth quarter, we believe we have begun to stabilize the business and create a foundation for returning the business to historical performance levels," he said in a statement, adding, "Because of our actions to reduce unproductive inventory, we had higher cash flow in 2011 than the prior year, and enter 2012 with a much cleaner inventory position."
In recent weeks and months, Sears Canada has launched several initiatives in addition to the inventory reduction, including de-cluttering stores, reducing prices on 5,000 items in its core offering by an average of 30%, and cutting jobs - most recently 400 store employees and approximately 70 head office staff. Sears also closed the cafés in most of its existing stores.
However, unlike its parent company - Hoffman Estates, Ill.-based Sears Holdings, which also owns Sears and Kmart in the United States - Sears Canada isn't closing any of its 196 corporately owned department stores or 30 home stores.
Sears Canada is a facing stepped-up competition from the likes of Wal-Mart Canada and Target, the big U.S. retailer that is expected to open its first Canadian stores about this time next year. While Sears Canada is likely to remain a leader in big-ticket home goods sales, many analysts believe it will lose ground to the two largest U.S. discounters in other critical categories.
In addition to its corporate stores, Sears also operates a network of 285 hometown dealer stores (the majority of which carry at least major appliances and mattresses) as well as some 1,700 catalog merchandise pick-up locations, 108 travel offices and a nationwide maintenance and repair network. It also publishes Canada's largest circulation general merchandise catalog and sells online at www.sears.ca.
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