sears canada profit falls by half
Last Updated : GMT 02:57:08
Arab Today, arab today
Arab Today, arab today

Sears Canada profit falls by half

Arab Today, arab today

Arab Today, arab today Sears Canada profit falls by half

Toronto - Arabstoday

Sears Canada Inc. saw its profit fall by more than half in the fourth quarter as the retailer’s holiday sales sank. The department store chain said net income for the 13-week period ended Jan. 28 fell to $38.7-million, or 36¢ a share, from $82.7-million, or 77¢ a share, a year ago. Sales at established stores, a key measure for retailers know as same-store sales, tumbled 7.4%. “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,” said Calvin McDonald, the chief executive officer hired last June to spearhead a turnaround at the flagging retailer. On an annual basis, the retailer suffered a loss of $60.1-million, or 58¢ per share, compared with earnings of $115.2-million, or $1.07, in fiscal 2010. “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.” Revenue at the retailer, which is more than 90% owned by Sears Holdings Corp., fell 6% in the fourth quarter to $1.37-billion. Mr. McDonald, a veteran of grocery chain Loblaw Cos. Ltd., has outlined a three-year turnaround plan focused on decluttering and upgrading stores and improving customer service. Last week, the company announced a reconfigured pricing program to offer consistently lower prices on popular goods, a strategy employed by Walmart. In addition, Sears said it would offer regular “Wow” price-slashing deals to entice customers through its doors more often. Analyst Keith Howlett of Desjardins Securities noted the decline in same-store sales coupled with a 245 year-over-year basis point drop in the gross margin rate in the quarter to 36.7% (the analyst had forecast 39.5%) was not a good sign. “Lower sales and a lower gross margin rate are a toxic combination,” he wrote in a note to clients. Mr. Howlett had been expecting earnings per share of 76¢. “After adjusting for one-time, pre-tax business transformation expenses of $14.4-million, operating per-share earnings of 46¢ were still well short of forecast,” he said. “In our view, the Sears Canada brand was severely damaged between 2006 and 2010, and brought down toward the level of Sears in the U.S. Given the continuous decline in sales and market share over many years, and the impending entry of Target stores into Canada in 2013, management’s challenge is, in our view, daunting. There is very little time left to obtain traction with a new strategy before competition intensifies.” The company has seen its shares fall 41% in the past 12 months on the Toronto Stock Exchange.

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