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Sears Canada, Inc.
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Sears Canada, Inc.
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TABLE OF CONTENTS
1 Sears Canada, Inc. ................................................................................................................................. 6
2 Sears Canada, Inc. - Key Employees ..................................................................................................... 7
3 Sears Canada, Inc. - Key Employees Biographies................................................................................. 8
4 Sears Canada, Inc. - Major Products and Services ................................................................................ 9
5 Sears Canada, Inc. - History................................................................................................................. 10
6 Sears Canada, Inc. - Company Statement ........................................................................................... 13
7 Sears Canada, Inc. - Locations and Subsidiaries ................................................................................ 16
7.1 Sears Canada, Inc. - Head Office ........................................................................................................................ 16
7.2 Sears Canada, Inc. - Other Locations and Subsidiaries ....................................................................................... 16
8 Sears Canada, Inc. - Business Analysis .............................................................................................. 17
8.1 Sears Canada, Inc. - Company Overview ............................................................................................................ 17
8.2 Sears Canada, Inc. - Business Description.......................................................................................................... 17
9 Sears Canada, Inc. - SWOT Analysis ................................................................................................... 18
9.1 Sears Canada, Inc. - SWOT Analysis - Overview ................................................................................................ 18
9.2 Sears Canada, Inc. - Strengths ........................................................................................................................... 18
9.2.1 Strength - Strong Financial Leverage .......................................................................................................... 18
9.2.2 Strength - Strong Store Network .................................................................................................................. 18
9.2.3 Strength - Specialized Service Offerings ...................................................................................................... 18
9.2.4 Strength - Multiple Channels Selling Strategy .............................................................................................. 18
9.3 Sears Canada, Inc. - Weaknesses ...................................................................................................................... 18
9.3.1 Weakness - Declining Operational Performance .......................................................................................... 18
9.3.2 Weakness - Product Recall ......................................................................................................................... 18
9.4 Sears Canada, Inc. - Opportunities ..................................................................................................................... 19
9.4.1 Opportunity - Growth in E-Retail .................................................................................................................. 19
9.4.2 Opportunity - Private Labels Gaining Momentum ......................................................................................... 19
9.4.3 Opportunity - Strategic Agreements/Contract ............................................................................................... 19
9.5 Sears Canada, Inc. - Threats .............................................................................................................................. 19
9.5.1 Threat - Shortage of Manpower ................................................................................................................... 19
9.5.2 Threat - Increase in Organized Retail Crime ................................................................................................ 19
9.5.3 Threat - Expansion by Competitor ............................................................................................................... 20
10 Sears Canada, Inc. - Company Financial Analysis .............................................................................. 21
10.1 Sears Canada, Inc. - Five Year Snapshot: Overview of Financial and Operational Performance Indicators .......... 21
11 Sears Canada, Inc. - Interim ratios ....................................................................................................... 23
11.1.1 Sears Canada, Inc. - Financial ratios: Capital Market Ratios ........................................................................ 23
11.2 Sears Canada, Inc. - Financial Performance and Ratio Charts ............................................................................ 24
11.2.1 Sears Canada, Inc. - Revenue and Operating margin .................................................................................. 24
11.2.2 Sears Canada, Inc. - Asset and Liabilities .................................................................................................... 25
11.2.3 Sears Canada, Inc. - Net Debt vs. Gearing Ratio ......................................................................................... 26
11.2.4 Sears Canada, Inc. - Operational Efficiency................................................................................................. 27
11.2.5 Sears Canada, Inc. - Solvency .................................................................................................................... 28
11.3 Sears Canada, Inc. - Key Competitors ................................................................................................................ 29
12 Sears Canada, Inc. - Mergers & Acquisitions and Partnerships .......................................................... 30
12.1 Sears Canada, Inc. - M&A and Partnerships Strategy ......................................................................................... 30
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13 Sears Canada, Inc. - Recent Developments ......................................................................................... 31
14 Appendix .............................................................................................................................................. 33
14.1 Methodology ....................................................................................................................................................... 33
14.2 Sears Canada, Inc. - Ratio Definitions ................................................................................................................. 33
14.3 Disclaimer........................................................................................................................................................... 38
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List of Tables
Table 1: Sears Canada, Inc. - Key Employees ..................................................................................................................... 7
Table 2: Sears Canada, Inc. - Key Employees Biographies ................................................................................................. 8
Table 3: Sears Canada, Inc. - Major Products and Services ................................................................................................ 9
Table 4: Sears Canada, Inc. - History ................................................................................................................................ 10
Table 5: Sears Canada, Inc. - Subsidiaries ........................................................................................................................ 16
Table 6: Sears Canada, Inc. - Annual ratios....................................................................................................................... 21
Table 7: Sears Canada, Inc. - Interim ratios ....................................................................................................................... 23
Table 8: Sears Canada, Inc. - Capital Market Ratios.......................................................................................................... 23
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List of Figures
TABLE OF CONTENTS ....................................................................................................................................................... 2
Figure 1: Sears Canada, Inc. - Revenue and Operating Profit ............................................................................................ 24
Figure 2: Sears Canada, Inc. - Financial Position .............................................................................................................. 25
Figure 3: Sears Canada, Inc. - Net Debt vs. Gearing Ratio ................................................................................................ 26
Figure 4: Sears Canada, Inc. - Operational Efficiency ........................................................................................................ 27
Figure 5: Sears Canada, Inc. - Solvency............................................................................................................................ 28
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1 Sears Canada, Inc.
Fast Facts
Headquarters Address Suite 700,Toronto,Ontario,M5B
2C3,Canada
Telephone +1 416 9414428
Fax +1 416 9412321
Website www.sears.ca
Ticker Symbol , Exchange Name SCC,Toronto Stock Exchange
Number of Employees 11,240
Fiscal Year End February
Revenue (US$ million) 4,032
SWOT Analysis
Strengths Weaknesses
Multiple Channels Selling Strategy Declining Operational Performance
Specialized Service Offerings Product Recall
Strong Financial Leverage
Strong Store Network
Opportunities Threats
Growth in E-Retail Expansion by Competitor
Private Labels Gaining Momentum Increase in Organized Retail Crime
Strategic Agreements/Contract Shortage of Manpower
Share Data
Share price (US$) as on 08 Sep 2014 15.07
EPS (US$) 4.43
Market Capitalization (US$ million) 1,535
Enterprise Value (US$ million) 1,359
Shares outstanding (million) 102
Financial Snapshot
Operating Performance
The company reported revenue of US$4,032 million during the fiscal year 2014 (2014). The company's revenue declined at a compounded rate of 5.47% during 2010–2014, with an annual decline of 8.16% over 2013. In 2014, the company recorded an operating margin of -3.64%, as against -1.17% in 2013.
Revenue and Margins
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2 Sears Canada, Inc. - Key Employees
Table 1: Sears Canada, Inc. - Key Employees
Name Job Title Board Level Since Age
Danita Stevenson Director, Senior Vice President - Apparel and Accessories Sears Canada Inc
Executive Board 2014 46
Douglas C. Campbell Chief Executive Officer, President, Director Executive Board 2013 43
E.J. Bird Chief Financial Officer - Interim, Director Executive Board 2013 51
S. Jeffrey Stollenwerck President - Sears Real Estate Business Sears Holdings Corporation, Director
Executive Board 2008 44
Timothy E. Flemming Director, Senior Vice President - Home & Hardlines and Strategic Initiatives Sears Canada Inc
Executive Board 2014 57
William C. Crowley Chief Executive Officer, Chairman Executive Board 2013 56
Klaudio Leshnjani Chief Operating Officer, Executive Vice President
Senior Management 2013
Salim Maherali Interim Senior Vice-President, Direct Senior Management 2013
Deborah E. Rosati Director Non Executive Board 2007 52
H Ronald Weissman Director Non Executive Board 2013 69
James McBurney Director Non Executive Board 2010 55
R. Raja Khanna Director Non Executive Board 2007 41
William C. Crowley Chief Executive Officer, Chairman Non Executive Board 2013 56
William R. Harker Director Non Executive Board 2008 41
Source: Canadean
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3 Sears Canada, Inc. - Key Employees Biographies
Table 2: Sears Canada, Inc. - Key Employees Biographies
Employee Details Biography
Douglas C. Campbell
Job Title : Chief Executive Officer, President, Director
Since : 2013
Age :43
Doug C Campbell has been the Chief Executive Officer, President and Director of the company since September 2013. Prior to this, he served as Executive Vice President and Chief Operating Officer of the company from 2011 and 2012 respectively. Also, he served as Principal for Boston Consulting Group during 2005 to 2011.
E.J. Bird
Job Title : Chief Financial Officer - Interim, Director
Since : 2013
Age :51
E. J. Bird has been the Chief Financial Officer and an Executive Vice President of the company since 2013. He has been the company’s Director since 2006. Prior to this, he was a private investor. He is also the President of Overflow Ministry since 2003. Before that, he served as an analyst for Levine Investments from 2002 to 2010 and as the Chief Financial Officer of ESL Investments, Inc. from 1991 to 2002.
Klaudio Leshnjani
Job Title : Chief Operating Officer, Executive Vice President
Since : 2013
Klaudio Leshnjani has been an Executive Vice President and Chief Operating Officer of the company since 2013. Prior to this, he served many senior management roles including Chief Administrative Officer and General Counsel, Executive Vice President, Financial and Home Services, Human Resources, Executive Vice-President, General Counsel and Corporate Communications and Senior Vice-President and General Counsel of the company.
William C. Crowley
Job Title : Chief Executive Officer, Chairman
Since : 2013
Age :56
William C. Crowley has been the Chairman and the Chief Executive Officer of the company since 2013. Prior to this he served as the Senior Vice President of Finance at Kmart Holding Corp., during 2003-05. He served as an Executive Vice President and the Chief Administrative Officer of Sears Holdings, and the President and the Chief Operating Officer of ESL Investments, Inc. Mr. Crowley is also a member of the Sears Holdings, SHLD Acquisition Corp. and AutoNation, Inc.
Source: Canadean
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4 Sears Canada, Inc. - Major Products and Services
Sears Canada Inc. is a multi-channel retailer in Canada. The key products and services offered by the company include the following:
Table 3: Sears Canada, Inc. - Major Products and Services
Products:
Apparel
Beauty Products
Bed and Bath Products
Electronics
Fitness and Health Products
Footwear
Furniture and Mattresses
Home Appliances
Home Products
Jewelry
Pet Accessories
Toys
Wallets and Bags
Belt, Gloves, and Scarves
Shawls and Wraps
Sunglasses and Watches
Services:
Car Rentals
Hair Care Centers
Home Installation Services
Information Technology Services
Optical Services
Repairs
Upholstery and Air Duct Cleaning
Portrait Studio
Financial Service
Brands:
Alpinetek
Attitude
Craftsman
DieHard
Jessica
Kenmore
Nevada
Pure NRG
Whole Home
Source: Canadean
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5 Sears Canada, Inc. - History
Table 4: Sears Canada, Inc. - History
Year Event type Description
2014
Contracts/Agreements
The company entered in to agreement with SHS Services Management Inc, whereby SHS will operate Sears installed home improvements business.
2014
New Products/Services
The company launched Style at Home decor collection across Canada.
2014
Stake Sale
The company entered into an agreement to sell its 15.00% minority ownership stake in the Centre commercial Les Rivières shopping center in shopping center in Trois-Rivières, Quebec, to Ivanhoé Cambridge.
2014
Contracts/Agreements
The company entered into an agreement with Concord Pacific Group of Companies to develop a 12-acre site in Calgary, Alberta.
2014
Contracts/Agreements
The company entered into an agreement with Sears Canada Inc. for the sale of their interests in Kildonan Place, a shopping centre located in Winnipeg, Canada.
2014
Product Recall
The company recalled Joe Boxer licensed boys 3-piece Eat Sleep Play Pyjama Sets.
2014
Corporate Changes/Expansions
The company opened a new fulfillment center in Calgary, Alberta.
2013
Contracts/Agreements
The company signed an agreement to sell its 50.00% joint venture with The Westcliff Group of Companies ("Westcliff") to Montez Income Properties Corporation ("Montez") for US$315 million.
2013
Corporate Awards
The company was named 2013 ENERGY STAR Retailer of the Year by Natural Resources Canada.
2013
Contracts/Agreements
The company entered into an agreement with Reitmans Canada to provide Penningtons Plus-Size Fashions for Sears stores and website.
2013
Corporate Changes/Expansions
The company introduced new Hometown Store Model in Orillia, Ontario, Canada.
2013
Contracts/Agreements
The company entered into strategic alliance with The ALDO Group to design and manufacture Nevada and Attitude footwear for men and women, along with Jessica brand for women.
2013
Contracts/Agreements
The company entered into strategic alliance with Buffalo International to design and manufacture Nevada denim-based apparel.
2013
Contracts/Agreements
The company entered into strategic alliance with SHS Services Management Inc., to operate Sears Installed Home Improvements business.
2012
Divestiture
The company sold its 40.00% ownership of the leasehold interest in Medicine Hat Mall in Alberta to Sleeping Bay Building Corp., for US$43 million.
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Table 4: Sears Canada, Inc. - History
Year Event type Description
2012
Corporate Changes/Expansions
The company opened its refreshed store concept in Ontario, Canada.
2012
Contracts/Agreements
The company had entered into an agreement to sell its Cantrex Group operations to Nationwide Marketing Group, LLC.
2012
New Products/Services
The company had launched its first application for iPhone and Android.
2011
Corporate Awards
The company won Retail Sustainability Award at the Excellence in Retailing Awards ceremony.
2011
Product Recall
The company recalled 10 products in FY2011.
2010
Corporate Changes/Expansions
The company opened a Hometown Store in Chase, BC, Canada.
2010
Corporate Changes/Expansions
The company opened dealer stores at Kincardine, Fergus, Bouctouche, Melville, Lacombe in Canada.
2009
Others
The company launched the Sears Water Appliance Program, an environmental initiative.
2008
Corporate Changes/Expansions
The company opened a new dealer store in Meadow Lake, Saskatchewan, Canada
2008
Corporate Changes/Expansions
The company opened a new department store in Hamilton, Canada.
2006
Corporate Changes/Expansions
The company relocated two of its dealer stores located in New Brunswick and one dealer store located in Quebec, Canada
2006
Contracts/Agreements
The company partnered with Amazon.com and re-launched its website, www.sears.ca.
2006
Corporate Changes/Expansions
Sears opened three dealer stores in Quebec and British Columbia, Canada.
2005
Acquisitions/Mergers/Takeovers
Sears acquired Cantrex Group.
2005
Corporate Changes/Expansions
The company opened eight new dealer stores.
2005
Divestiture
The company sold its credit and financial services operations to JP Morgan Chase Bank.
2004
Plans/Strategy
The company announced its plans to exit automotive parts and service business.
2004
Divestiture
The company sold its interest in the Pine Center, Prince George shopping center in British Columbia, Canada.
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Table 4: Sears Canada, Inc. - History
Year Event type Description
2003
Corporate Changes/Expansions
The company entered banking services segment by forming Sears Canada Bank.
2003
Acquisitions/Mergers/Takeovers
The company acquired Esso Home comfort service and equipment business from Imperial Oil in selected markets in Ontario, Quebec, Nova Scotia, and Newfoundland, Canada.
2002
New Products/Services
Sears launched new online travel service, SearsTravel.ca.
2002
Contracts/Agreements
The company became the exclusive retailer of the Martha Stewart Everyday house wares line.
2000
New Products/Services
The company launched a new banner Eatons.
1999
Acquisitions/Mergers/Takeovers
The company acquired T Eaton.
1998
New Products/Services
The company launched web site www.sears.ca
1995
Corporate Changes/Expansions
The company opened its first Sears Whole Home Furniture store.
1994
Corporate Changes/Expansions
Sears launched dealer stores, which provided appliance and electronics goods through independent, locally owned outlets.
1984
Corporate Changes/Expansions
Simpsons-Sears Limited was renamed as Sears Canada Inc.
1983
Ownership Changes
Sears, Roebuck and Co. acquired 17 million shares of Simpsons-Sears Limited owned by the Hudson's Bay.
1978
Ownership Changes
Hudson’s Bay acquired Simpsons Limited and also acquired 35.00% shares of Simpsons-Sears Limited.
1971
Corporate Changes/Expansions
The company modified its logo with the name ’Sears’, to prevent customer confusion between Simpsons and Simpsons-Sears.
1963
Corporate Changes/Expansions
The company opened its first store in Quebec, Canada.
1958
Corporate Changes/Expansions
The company opened 36 retail outlets across Canada.
1953
New Products/Services
The company launched first Simpsons-Sears spring/summer catalogue.
1952
Incorporation/Establishment
Sears Canada Inc. was established as Simpsons-Sears Limited a joint venture company by Robert E. Wood and Edgar G. Burton.
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6 Sears Canada, Inc. - Company Statement A statement by Mr. Douglas C. Campbell, the Chief Executive Officer, President and Director of Sears, is given below. The statement has been taken from the company’s 2013 annual report. Sears Canada is focused on re-establishing business fundamentals, creating a solid foundation on which we can grow and establish a strong future. While there were visible improvements to Sears over the past few years, the foundation to support and sustain many of these improvements was not sufficient. Consequently, we did not see the long-term results on which we were counting. To ensure that initiatives in the future can have long term success, we are improving our planning process, investing in systems and standardizing store execution principles. The pace at which the enterprise has been moving since late 2013 and early 2014 to improve our results has been accelerating significantly. The management team is reviewing all areas of the organization and implementing continuing improvement initiatives. Going forward, we will create maximum value through the use of three levers: merchandising, operating efficiency and network optimization. All three levers were used in 2013 and will continue to be employed in 2014. Merchandising The Merchandising lever incorporates those elements which relate to our relationship with the Canadian consumer and the goods and services we offer them. Our focus is on this lever because it is the key to long term organic growth in revenue and gross margin. While there are several initiatives underway that relate to the work we are doing within this lever, the key ones center on: • Sears Value Proposition • Product Development • Retail Fundamentals • Direct Business Sears Value Proposition Sears history began over 60 years ago serving suburban and rural working Canadian families with a value proposition based on quality merchandise for a reasonable price. Today, Canadians of all walks of life, income levels and communities come to Sears because the elements of our value proposition still resonate. Providing products to our customers that represent great value is paramount to our success. Value is a word that is thrown around a lot in the retail industry and often undefined. For Sears, it is a balance of price, quality and service. Those three elements presented in the right balance through the products we offer and the services we provide differentiate Sears in the marketplace. Many retailers are moving their proposition further and further upscale becoming more “exclusive” in the customers they serve. For Sears, we are focusing our value proposition on being an “inclusive” retailer serving all Canadians who share our view of value as that right balance of price, quality and service. Product Development We are increasing the products we offer under “Canada’s Best”, a seal of approval that is assigned to carefully selected fashion and home products that meet the highest standards in quality, style and innovation, and which we offer at unexpectedly reasonable prices. Our Alpinetek women’s downfilled winter parka at $179.97, the Jessica women’s washable suit at $79.97 and the 75,000 BTU Kenmore gas grill at $499.97 are great examples of this program. We continue to develop our private brands to resonate with the lifestyle of Canadians. Our Pure NRG Athletics women’s activewear brand introduced in January of 2014 is an example of capitalizing on the growth of yoga, activewear and casual sportswear. The success of this line after just a few weeks is encouraging. We also introduced a private brand of casual men’s sportswear in our Spring 2014 LOOK! report. The relaxed Logan Hill line of mix and match separates features cargo pants, chinos, shorts, sweaters, wovens, and knits from $12.97. Programs like these resonate well with customers and helped us gain a positive same-store sales increase in our Apparel and Accessories business of 4.2 percent in 2013 vs. 2012. National Brands with exclusivity also provide value to Sears customers. We introduced Carter’s and Osh Kosh children’s apparel during the year, and Penningtons plus-sized apparel for women. We also launched Just Keep Livin’ (JKL), the men’s apparel line inspired by actor Matthew McConaughey’s laid-back style. A portion of the proceeds of JKL support our long-time community partner, Boys and Girls Clubs of Canada. Brands like these help improve our apparel offering and complement the work we are doing with private brands. We rebranded our Sears-O-Pedic mattress sets to Whole Home to broaden the scope of this home décor private brand. In addition, we continued to dominantly market Kenmore, Canada’s number one brand of major appliances.
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As we move forward in 2014, we will continue to introduce products in either private brands or exclusives to bring differentiation and innovation to our customers. Retail Fundamentals By the end of 2013, we had refreshed or reset 58 of our full-line stores, with emphasis on merchandise presentation and standards. While we are pleased with how these stores look, we need to improve how we are executing on the fundamentals of the business. It is futile to provide great shopping environments and not have what a customer wants when they want it. A great merchandise presentation isn’t going to help sales without core sizes and colours being available to the customer. Going forward, we plan to invest in replenishment systems and training that are going to keep us in stock while improving inventory turns. We also need to improve the balance of inventory we devote to frequently sought-after essentials. As we develop our retail fundamentals, we are focusing on stock levels in core merchandise as a priority, before moving on to other items which sometimes come with more risk. Related to this is the tailoring of our assortments. In many categories, we are over assorted. For example, a selection of 20-plus toasters only confuses customers rather than help them. Our approach is to reduce the breadth of our assortment and use those dollars to buy adequate depth of the best items. Effective management of inventory principles is another important retail fundamental. Reducing aged inventory allows us to buy current season goods in substantial enough quantities to stay in stock. We were successful in reducing our year-end inventory in 2013 by $76.8 million versus the end of 2012. Taking advantage of the winter that lingered, our direction to stores was to clear out the remaining fall-winter inventory from store stockrooms and move everything to the floor priced to sell during January and February of 2014. Our intention going forward is to have inventory arrive in store and move directly to the selling floor where customers can see it. We need to flow the merchandise better on a consistent basis; this work represents a sizable amount of our effort in 2014 and we believe the payback will be significantly increased customer satisfaction and improved inventory turns. Direct Business As Canadians continue to embrace e-commerce, we are proactively managing a shift from catalogue to internet. In 2013, we experienced growth in internet that exceeded the catalogue decline. Our internet business and infrastructure to support it will be a focus of investment in 2014. Operating Efficiency Operating efficiency centers on prudent expense management and identifying inefficiencies within the business. In the immediate term, this is a priority for Sears because the initiatives we are undertaking are giving us time and capacity to establish the retail fundamentals that support our improved merchandising. Three key components of the Operating Efficiency lever where we undertook substantial initiatives during 2013 are: • Expense Management • Outsourcing • Right-Sizing Expense Management When we remove the transformation expenses which are primarily related to severance, we reduced total operating expenses in 2013 by $98 million versus 2012. The reductions we implemented are the result of a stringent review of our business practices, and the identification of where we can be more cost efficient without affecting profitable revenue generation or customer service. Outsourcing Outsourcing is a practice we consider for non-core activities requiring significant investment when we can find a partner who can provide our customers with the level of service they would expect from Sears. For example, during 2013 we announced outsourcing for some of our customer call centre activities, some information technology, some finance, accounting and payroll, and some indirect procurement. To maintain these operations as part of Sears would have taken significant investments in technology and resources. Doing so would take away from the investment we want to make to support our core business, such as stores, marketing, replenishment system upgrades and other important information technology enhancements.
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Right-Sizing We also took the opportunity in 2013 to right-size the organization, including the restructure of certain businesses such as Repair Services and Parts and the de-layering of the management structure. We will continue to optimize the structure of the Company to more closely align to the size and needs of the current business. Network Optimization The Network Optimization lever is focused on maximizing the return the Company receives through its assets such as real estate and non-core businesses. In considering its real estate, the Company will evaluate opportunities that may become available to monetize assets when the market value of those assets exceeds the retailing value. Concurrently, the Company seeks creative ways to optimize and unlock the value of non-core assets in the network such as specialized businesses or non-retail related services. Three key initiatives during 2013 which we announced were: • Store leases • Joint Arrangement • Burnaby Development Store Leases In 2013, in response to substantial offers from landlords, we terminated leases early on seven stores, with an option on an eighth, for total consideration of $591 million. While the stores involved were profitable, the value of the transaction far exceeded the EBITDA we could have realized in those stores even over a period of many years. While we have no plans to vacate additional stores, we continue to review our portfolio and may consider proposals that will substantially create value without affecting our presence as a major national retailer, or our focus on suburban, mid-market and rural locations. Joint Arrangement We sold a 50% joint arrangement interest for $315 million in eight properties that we owned. The properties involved are comprised of four regional shopping centres, two strip centres and two open-format retail centres. While some of these properties contain a Sears location, any Sears store currently situated on these properties will remain in operation and we expect no impact on customers or associates in these stores as a result of this transaction. Burnaby Development In association with Concord Pacific Group of Companies, we are pursuing the development of the Sears site located at one of Canada’s most important shopping centres, Metropolis at Metrotown in Burnaby, British Columbia. Sears submitted an application to the City of Burnaby regarding nine acres of the Company’s property on and adjacent to its store at that location. The vision of the redevelopment is a major urban-infill project consisting of seven residential and office high-rises along with ground-level retail. While it is still too early to tell if conditions will allow the project to proceed, it is important to note that the Company has the potential to use assets to earn potential income and continue to operate a store with access to a great number of new condo residents and workers who will occupy the buildings planned for this space. A Solid Foundation for a Stronger Future Establishing a solid foundation for a stronger future requires the commitment of everybody in the organization. I want to thank our associates, coast to coast, for their support and hard work as we plan for the future of Sears Canada. I am excited by the energy of our team and their desire to make the Company better. Together, we are taking steps today that will allow us to continue serving customers as a major national retailer in stores and through our Direct channel now and in the years ahead.
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7 Sears Canada, Inc. - Locations and Subsidiaries
7.1 Sears Canada, Inc. - Head Office
Sears Canada, Inc.
Suite 700
Toronto
Ontario
Zip: M5B 2C3
Canada
Tel: + 1 416 9414428
Fax: + 1 416 9412321
7.2 Sears Canada, Inc. - Other Locations and Subsidiaries
Table 5: Sears Canada, Inc. - Subsidiaries
SLH Transport Inc.
1585 Centennial Drive
Kingston
Canada
Tel: + 1 613 3849515
Fax: +1 613 3845925
Zip: K7L 4V2
Source: Canadean
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8 Sears Canada, Inc. - Business Analysis
8.1 Sears Canada, Inc. - Company Overview
Sears Canada Inc. (Sears) is a multi-channel retailer based in Canada. The company's products portfolio includes apparel, beauty products, bed and bath products, electronics, fitness and health products, footwear, furniture and mattresses, home appliances, home products, jewelry, pet accessories, toys, wallets and bags, belt, gloves, and scarves, shawls and wraps, sunglasses and watches. Sears offers these products under both private label and national brands . The company also provides various services such as car rentals, hair care centers, home installation services, information technology services, optical services, repairs, upholstery and air duct cleaning, portrait studio and financial service. Geographically, the company operates in the US and Canada. The company is headquartered in Toronto, Ontario, Canada.
8.2 Sears Canada, Inc. - Business Description
Sears is a multi-channel retailer in North America. The company operated 457 stores, six NLCs, 97 Travel Office and 1,446 catalog merchandise pick-up locations in the US and Canada as of February 2014. The company also operates four distribution centers in Canada. The company's product portfolio includes a wide range of toys, footwear, home improvement products, house wares, furniture, appliances, electronics, gardening items. The company provides various specialized services through home improvement products and services division. In FY2014, the company generated CAD1,463 million (36.6%) of the total revenue from Apparel and Accessories followed by Home and Hardlines with CAD998 million (25%), Major Appliances with CAD823 million (20.6%), Services and other with CAD343 million (8.6%), Other merchandise with CAD228 million (5.7%) and Commission and licensee with CAD137 million (3.4%). The company operates under two reportable segments: Merchandising and Real Estate Joint Agreements. The Merchandising segment offers products and services through various retail channels including Full-Line Department store, Sears Home, Hometown Dealer, Outlet, Appliances and Mattresses, Corbeil Electrique Inc. stores and its Direct channel. The Full-Line Department store are involved in offering products in three categories which includes apparel and accessories for man, woman and children’s, cosmetics, nursery products, footwear and accessories. It also offers home furnishings and mattresses, home decor, lawn and garden, hardware, electronics and leisure, and seasonal products, besides offering refrigeration, laundry, floor care and sewing services. As of February 2014, the company operated 118 Full-Line departmental stores. Sears Home stores, offers products such as furniture, mattresses and box-springs, and major appliances. This section also offers limited selection of electronics. The store size ranges from 35,000 to 60,000 sq. ft. As of February 2014, the company operated 48 Sears Home stores. The company, under Hometown Dealer stores offers mattresses and box-springs, major appliances, outdoor power equipment, electronics and furniture. Apart from this, it offers merchandise ordered through catalogs at pick-up locations. As of February 2014, the company operated 234 Hometown Dealer stores. Under the Outlet stores, the company offers clearance merchandise, basically from the company’s Full-Line Department stores and Direct channel. As of February 2014, the company operated 11 Outlet stores. Sears thorough its Appliances and Mattresses stores offers a wide selection of major appliances, and mattresses and box-springs under Sears private labels and a variety of national brands. The store size ranges from 10,000 to 15,000 sq. ft. As of February 2014, the company operated four Appliances and Mattresses stores. Corbeil Electrique Inc. is a chain of major appliance specialty stores located in Quebec, the Greater Toronto Area and Eastern Ontario of Canada. The average store size is 6,500 sq. ft. As of February 2014, the company operated 34 Corbeil stores out of which 16 are franchised stores. The company's Direct Channel selling business includes catalog business and an e-commerce website Sears.ca through which it offers extensive general merchandise selection. At the end of review period, around 89 million people visited its e-commerce website. In FY2014, the Merchandising segment reported revenues of CAD3,945 million, accounting for 98.8% of the company’s total revenue. Under the Real Estate Joint Agreements, the company operates three shopping centers in Canada in the joint agreement with Ivanhoé Cambridge, in which the company has 15% to 20% interest. In FY2014, the Real Estate joint Agreement segment reported revenues of CAD46 million, accounting for 1.2% of the company’s total revenue.
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9 Sears Canada, Inc. - SWOT Analysis
9.1 Sears Canada, Inc. - SWOT Analysis - Overview
Sears Canada Inc. (Sears) is a retailer in the Canada. Strong financial leverage along with strong store network, multiple channel selling strategy and specialized service offerings are the key strengths of the company even as declining operational performance and product recall remains area of concern. Going forward, it faces challenges from shortage of manpower, expansion by competitor and increase organized retail crime. However, strategic agreement/contract, growing private labels markets and growth of e-retail industry ensure a strong future for the company.
9.2 Sears Canada, Inc. - Strengths
9.2.1 Strength - Strong Financial Leverage
The financial leverage or solvency position of the company affects its ability to borrow and repay money which in turn affects its business operations. The solvency position of Sears may be sound due to less debt funding than equity. The company recorded debt to equity ratio of 0.03 at the end of FY2014 against its competitors Canadian Tire Corporation, Limited and Hart Stores Inc., which reported debt to equity ratio of 0.66 and 0.18, respectively. Furthermore, the debt levels of the company decreased to CAD36 million on an annual basis at the end of FY2014 as compared to CAD59 million . Strong solvency position indicates utilization of lower financial leverage and its comparatively higher equity position, underlining the better creditworthiness of the company.
9.2.2 Strength - Strong Store Network
Extensive store network helps the company to reach a wide customer spectrum and increase its sales. As of February 2014, the company operates 457 stores, six NLCs, 97 Travel Office and 1,446 Catalogue merchandise pick-up locations in the US and Canada.. It operates 181 corporate stores, 234 dealer stores, 34 Corbeil stores, 97 Travel offices and six NLCs with a total selling space of 24.8 million sq. ft. across the country. In addition, it also operates four distribution centers in Canada. Therefore, the strong store network helps the company to enjoy high market penetration that lifts the footfalls.
9.2.3 Strength - Specialized Service Offerings
Sears Canada offers specialized services, which differentiate its stores, attracts a broad customer base and generates higher revenue. In addition to traditional merchandise retail, Sears offers travel offices, optical services, hair care centers, health food shops, income tax services, portrait studios, parts and service network, lawn care, upholstery and air duct cleaning, gas bars, car rental, driver training, home installation and florists. The company through these offering may differentiate itself from its competitors and thus, attract large number of customers.
9.2.4 Strength - Multiple Channels Selling Strategy
The sale of merchandise through multiple channels increases the company’s direct-to-consumer business. Sears retails its products through a combination of traditional grocery stores and online business formats. The company operates a retail estate of 457 stores, six NLCs, 97 Travel Office and 1,446 Catalogue merchandise pick-up locations under the Full-Line Department store, Sears Home stores, Outlet stores, appliances and Mattresses stores, Hometown Dealer stores, Sears Home Services Showrooms and Corbeil stores. In addition, the company retails merchandise online at www. Sears.ca. Diverse retail and marketing channels helps to increase brand awareness, store traffic and sales.
9.3 Sears Canada, Inc. - Weaknesses
9.3.1 Weakness - Declining Operational Performance
Sears displayed poor financial growth in FY2014 during which the company recorded significant decline in income levels. In FY2014, the company reported operating loss of CAD145 million, a decrease of 186.6%, in comparison with an operating loss of CAD51 million registered in FY2013. Furthermore, the company's operating margin was -3.6% for the FY2014, which was below the value of -1.2% in FY2013. The company's poor operational performance may reduce the investors’ confidence and have a negative impact on the company's growth prospects.
9.3.2 Weakness - Product Recall
Product recalls may significantly affect Sears’s brand equity. Earlier, in May 2014, the company recalled digital thermostats manufactured by White-Rodgers due to the alkaline batteries which are used in the thermostat can leak onto the circuit
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board posing a fire hazard. In same month, company recalled Radian Restraint Systems manufactured by Diono because the product was shipped without the required memory foam insert in the seat pan fabric which may transmit excessive loads to the child occupant which could cause injury. Further more in April 2014, company voluntary recalled a Whole Home Outdoor Hurricane Candle Holders. The recalled was made because of the top which can detach causing a potential fire/burn hazard. Frequent product recalls indicate poor quality measures, which in turn might tarnish the company’s brand image. Furthermore, besides sales lost due to product unavailability during the recall process, the company incurs various costs associated with the recall process that increases operational expenditure.
9.4 Sears Canada, Inc. - Opportunities
9.4.1 Opportunity - Growth in E-Retail
The company stands to benefit from growing trend of online retailing in Canada, which provides consumers the convenience of shopping from home. With the increase in interactive methods and limitless content, the retail e-commerce is growing at a faster rate. According to the Canadian Internet Registration Authority (CIRA), Canadians are the second heaviest users of the internet in the world. CIRA’s 2014 fact book reports that the Canadians have been spending an average of 41.3 hours online per month, compared to 38.9 hours in the UK and with a world average of 24.6 hours. The agency also projected fast growth in online commerce in the coming years, averaging 7.40% through 2016. As Sears sells its products through online shopping websites www.sears.ca, may utilize the opportunity to market its presence across the globe through internet services.
9.4.2 Opportunity - Private Labels Gaining Momentum
The company stands to benefit from the increasing demand for private label products. Following a period of slow and negative economic growth, private label sales are rising as consumers increasingly shop to a budget. While price is a prime factor driving private label sales, improvements in packaging and quality have helped to remove the stigma attached with buying store brands. The company’s private label brands include Alpinetek, Attitude, Craftsman, DieHard, Jessica, Kenmore, Nevada, Pure NRG and Whole Home.. As the company sells private label products it has a strong opportunity to increase its profit margins in the future.
9.4.3 Opportunity - Strategic Agreements/Contract
Strategic initiatives offer a strong growth opportunity for the company, especially while foraying into new markets. Sears focuses on collaborations and agreements to expand its business operations and support its position in the retail industry. In this direction, in June 2014, the company entered into a binding agreement with Concord Pacific Group of Companies development of the 12-acre Sears site located at the North Hill Shopping Centre in Calgary, Alberta. As a result of this contract Sears will able to expands its business in the Alberta market. Further more in July 2013, the company entered into an agreement with Reitmans (Canada) Limited to provide Penningtons Plus-Size fashions for Sears stores and website. Such strategic agreement initiatives help the company to diversify its operations to new markets providing significant growth in the revenues in the long run.
9.5 Sears Canada, Inc. - Threats
9.5.1 Threat - Shortage of Manpower
The company’s operations may suffer as a result of manpower shortage in Canada. According to the Canadian Chamber of Commerce, one of the biggest challenges to be faced by the Canadian economy once the global recession eases will be shortage of manpower. The problem of shortage of manpower is going to become more severe in the long-run with the birth rates declining and the population ageing. According to the Canadian government’s chief actuary, the number of people above the age of 65 is going to rise from 15.3% in 2013 to 26.3% by 2075. As a result of which Canada will face severe manpower demand supply imbalance in the coming years and the government needs to take action to address this problem. Furthermore, according to Manpower 2013, Talent Shortage Survey Results 34% of the employers in Canada find difficulty in filling job vacancies. Since the company operates in Canada, the company may face disruptions in its operations as a result of manpower shortage in the country.
9.5.2 Threat - Increase in Organized Retail Crime
Organized retail crime is on the rise and this may negatively affect the profits of retailers. According to a survey conducted by the National Retail Federation, 93.50% of retailers reported acts of organized retail crime in 2013. Many retailers had cut their staff to reduce costs during the global financial crisis, which further increased the problem. Moreover, many consumers are now turning to auction sites to find budgeted deals, which provide a market for stolen goods. Every year, organized retail crime losses total an estimated US$15 billion–US$30 billion. This poses a challenge to the company’s in-store sales and may limit its revenues.
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9.5.3 Threat - Expansion by Competitor
Competition is high among the retail store irrespective of their sales, quality, and availability of products. Competition within the industry is generally on the basis of the sales, maintaining low cost, and customer service, price of the product and brand equity. The company’s key competitors include Canadian Tire Corporation, Limited, Hart Stores Inc., Hudson's Bay Company, Loblaw Companies Limited, RONA inc., The Jim Pattison Group and Walmart Canada Corp. While major retailers have undertaken expansion programs to match the growth rate, the market also witnessed consolidation involving mergers and acquisitions and expansion strategies. For instance, in November 2013, the Hudson's Bay Company (HBC) acquired Saks Incorporated. As a result the company will enhance its presence in North American. Furthermore in August 2013, Canadian Tire Company’s (Canadian Tire) subsidiary FGL Sports Ltd. (FLG Sports) acquired the Pro Hockey Life (Pro Hockey) who provides the best hockey products available in the world. As a result of this acquisition the Canadian Tire will enhance FGL Sports' capacity to provide Canadians with an unparalleled selection of hockey equipment, knowledgeable staff and excellent customer experience. Such consolidations within the sector may result in large companies intensifying competition that may cause the company to lose out on certain customers.
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10 Sears Canada, Inc. - Company Financial Analysis
10.1 Sears Canada, Inc. - Five Year Snapshot: Overview of Financial and Operational Performance Indicators
The company reported revenue of US$4,032 million during the fiscal year 2014 (2014). The company's revenue declined at a compounded rate of 5.47% during 2010–2014, with an annual decline of 8.16% over 2013. During 2014, operating margin of the company was -3.64% in comparison with operating margin of -1.17% in 2013. In 2014, the company recorded a net profit margin of 11.19% compared to a net profit margin of 2.33% in 2013.
Table 6: Sears Canada, Inc. - Annual ratios
Key Ratios Unit/Currency 2014 2013 2012 2011 2010
Equity Ratios
EPS (Earnings per Share) CAD 4.38 0.99 -0.48 1.16 2.18
Dividend per Share CAD 5 1 7
Dividend Cover Absolute 0.88 0.99 0.17
Book Value per Share CAD 10.54 10.57 10.63 11.96 20.91
Cash Value per Share CAD 0.1 0.2 0.2 0.19
Profitability Ratios
Gross Margin % 36.17 36.75 36.52 38.88 9.39
Operating Margin % -3.64 -1.17 -1.1 3.79 6.68
Net Profit Margin % 11.19 2.33 -1.09 2.53 4.51
Profit Markup % 56.66 58.1 57.53 64.06 10.36
PBT Margin (Profit Before Tax) % 12.28 2.63 -1.23 3.79 6.68
Return on Equity % 41.58 9.4 -4.61 9.92 10.43
Return on Capital Employed % -9.42 -2.96 -2.74 9.96 13.2
Return on Assets % 18.66 4.04 -1.82 4.3 5.84
Return on Fixed Assets % -14.89 -3.89 -3.65 13.94 21.89
Return on Working Capital % -25.63 -12.34 -10.9 34.85 33.22
Growth Ratios
Sales Growth % -8.16 -5.91 -6.07 -5.43 -9.29
Operating Income Growth % -127.2 -46.17 -17.63
EBITDA Growth % 149.85 -85.68 -12.82 314.69 -15.29
Net Income Growth % 341.21 -140.24 -46.74 -19.26
EPS Growth % -143.79 -50.15 -9.91
Working Capital Growth % 38.06 -12.06 -13.02 -48.69 -8.91
Cost Ratios
Operating Costs (% of Sales) % 103.64 101.17 101.1 96.21 93.32
Administration Costs (% of Sales) % 37.39 35.45
Liquidity Ratios
Current Ratio Absolute 1.67 1.52 1.52 1.52 1.76
Quick Ratio Absolute 0.76 0.44 0.61 0.6 1.14
Cash Ratio Absolute 0.59 0.29 0.43 0.41 1
Leverage Ratios
Debt to Equity Ratio Absolute 0.03 0.06 0.14 0.1 0.15
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Table 6: Sears Canada, Inc. - Annual ratios
Key Ratios Unit/Currency 2014 2013 2012 2011 2010
Net Debt to Equity Absolute 0.2 0.08 0.17 0.12 0.17
Debt to Capital Ratio Absolute 0.02 0.03 0.08 0.07 0.13
Efficiency Ratios
Asset Turnover Absolute 1.67 1.74 1.67 1.7 1.3
Fixed Asset Turnover Absolute 5.08 3.89 3.86 5.48 5.41
Inventory Turnover Absolute 3.29 3.23 3.56 3.14 5.53
Current Asset Turnover Absolute 2.82 3.62 3.36 3.15 2.14
Capital Employed Turnover Absolute 3.72 4.04 4.23 3.92 2.31
Working Capital Turnover Absolute 7.04 10.58 9.89 9.2 4.97
Revenue per Employee CAD 355142
Net Income per Employee CAD 39724
Capex to Sales % 1.77 2.34 1.82 1.21 1.26
Source: Canadean
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11 Sears Canada, Inc. - Interim ratios
Table 7: Sears Canada, Inc. - Interim ratios
Key Ratios Unit/Currency Aug-2014 May-2014 Feb-2014 Nov-2013
Equity Ratios
Interim EPS (Earnings per Share) CAD -0.21 -0.74 3.67 -0.48
Book Value per Share CAD 9.58 9.77 10.54 11.3
Profitability Ratios
Gross Margin % 33.29 32.81 33 37.2
Operating Margin % -6.24 -13.02 -2.98 -6.44
Net Profit Margin % -2.52 -9.74 31.61 -4.97
Profit Markup % 49.91 48.83 49.24 59.23
PBT Margin (Profit Before Tax) % -3.94 -13.26 35.6 -6.67
Cost Ratios
Operating Costs (% of Sales) % 106.24 113.02 102.98 106.44
Administration Costs (% of Sales) % 36.14 42.78 37.57 40.83
Liquidity Ratios
Current Ratio Absolute 1.66 1.66 1.67 1.84
Quick Ratio Absolute 0.61 0.58 0.76 0.68
Leverage Ratios
Debt to Equity Ratio Absolute 0.03 0.03 0.03 0.03
Net Debt to Equity Absolute 0.22 0.17 0.2 0.15
Debt to Capital Ratio Absolute 0.02 0.02 0.02 0.02
Source: Canadean
11.1.1 Sears Canada, Inc. - Financial ratios: Capital Market Ratios
Table 8: Sears Canada, Inc. - Capital Market Ratios
Key Ratios Value
P/E (Price/Earnings) Ratio 3.4
EV/EBITDA (Enterprise Value/Earnings Before Interest, Taxes, Depreciation and Amortization) 2.24
Enterprise Value/Sales 0.34
Enterprise Value/Operating Profit 0
Enterprise Value/Total Assets 0.56
Dividend Yield 0.34
Note: Above ratios are based on share price as of 08-Sep-2014. The above ratios are absolute numbers.
Source: Canadean
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11.2 Sears Canada, Inc. - Financial Performance and Ratio Charts
11.2.1 Sears Canada, Inc. - Revenue and Operating margin
The consolidated group revenue of the company for 2014 stood at US$4,032 million, which corresponds to a decline of 8.16% over the previous year. The operating margin of the company was -3.64% in 2014, a decrease of 247.00 basis points over the previous year.
Figure 1: Sears Canada, Inc. - Revenue and Operating Profit
Source: Canadean
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11.2.2 Sears Canada, Inc. - Asset and Liabilities
The company's assets declined by 4.49% over the previous year to US$2,416 million in 2014. The company's liabilities declined 7.69% over the previous year to US$1,332 million in 2014. The company's asset to liability ratio improved from 1.75 in 2013 to 1.81 in 2014.
Figure 2: Sears Canada, Inc. - Financial Position
Source: Canadean
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11.2.3 Sears Canada, Inc. - Net Debt vs. Gearing Ratio
The company recorded lower net debt of US$26 million at the end of fiscal year 2014 when compared to the previous year's net debt of US$39 million.The company's gearing ratio for the year 2014 was 0.03, which was lower when compared to the previous year's gearing ratio of 0.05. The gearing ratio remained lower in 2014 due to lower debt funding activities over equity.
Figure 3: Sears Canada, Inc. - Net Debt vs. Gearing Ratio
Source: Canadean
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11.2.4 Sears Canada, Inc. - Operational Efficiency
The company's working capital turnover for 2014 declined to 7.04, from the previous year's working capital turnover of 10.58. In 2014, the company's asset turnover declined to 1.67 from the previous year's asset turnover of 1.74.
Figure 4: Sears Canada, Inc. - Operational Efficiency
Source: Canadean
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11.2.5 Sears Canada, Inc. - Solvency
In 2014, the company's current ratio increased to 1.67 from the previous year's current ratio of 1.52. The company’s quick ratio increased to 0.76 in 2014 from the previous year's quick ratio of 0.44. In 2014, the company’s debt ratio remained unchanged at 0.02.
Figure 5: Sears Canada, Inc. - Solvency
Source: Canadean
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11.3 Sears Canada, Inc. - Key Competitors
The following companies are the major competitors of Sears Canada, Inc.: The Jim Pattison Group
Hart Stores Inc.
Canadian Tire Corporation, Limited
Hudson's Bay Company
RONA inc.
Walmart Canada Corp.
Loblaw Companies Limited
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12 Sears Canada, Inc. - Mergers & Acquisitions and Partnerships
12.1 Sears Canada, Inc. - M&A and Partnerships Strategy
Sears Canada partners with Buffalo International
Deal Type Partnership Deal Sub Type Co-development
Deal Status Completed Announced Date 1/17/2013 12:00:00 AM
Deal in Brief
Sears Canada Inc., an operator of departmental and specialty stores, has entered into a strategic alliance with Buffalo International Inc., a designer and manufacturer of clothing for women and men, to design and manufacture Sears entire line of Nevada denim-based apparel. Both companies involved in the transaction are based in Canada. Under the agreement, the Nevada lifestyle brand will encompass men's and women's apparel and will be ava ilable in Sears’ stores beginning in fall 2013.
Participant Company Information
Company Name Buffalo International Inc. Involvement Type Target
Company Overview
Buffalo International Inc. is a designer and manufacturer of clothing for women and men.
Sears Canada partners with ALDO Group
Deal Type Partnership Deal Sub Type Co-development
Deal Status Completed Announced Date 1/17/2013 12:00:00 AM
Deal in Brief
Sears Canada Inc., an operator of departmental and specialty stores, has entered into a strategic alliance with ALDO Group, Inc., a manufacturer and retailer of footwear and accessories, to design and manufacture Sears entire line of Nevada and attitude footwear for men and women, as well as the Jessica brand for women. Both companies involved in the transaction are based in Canada. As part of the transaction, the brands will be available in Sears’ stores across Canada beginning with the Fall 2013 season.
Participant Company Information
Company Name Aldo Group Inc. Involvement Type Target
Company Overview
Aldo Group Inc. (ALDO) is a fashion apparel products retailing company. The company designs and produces fashion footwear, handbags and accessories. It retails products including shoes, boots, sandals, handbags, bracelets, hats, scarves, gloves, necklaces, earrings, rings and others. ALDO offers sunglasses, hair accessories, belts, leg wear, watches, wallets, totes, clutches, and satchels and messengers. The company distributes its products under the brand names including ALDO, CALL IT SPRING, LOCALE, LITTLE BURGUNDY and GLOBO. It operates through its 1750 retail stores located across Canada, the U.S, the U.K. and Ireland. ALDO is headquartered in Saint-Laurent, Quebec, Canada.
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13 Sears Canada, Inc. - Recent Developments Sears Canada reports second quarter results
Sears Canada announced its unaudited second quarter results. Published Date : 8/21/2014 12:58:00 PM Sears Canada announces opening of new fulfillment centre in Calgary
Orders for 2014 Wish Book launching this weekend will comprise first shipments from new facility. Published Date : 8/21/2014 12:00:00 AM Ivanhoé Cambridge and Sears Canada announce sale of their interests in Kildonan Place
Ivanhoé Cambridge and Sears Canada announced today that they have entered into an agreement for the sale of their interests in Kildonan Place, a shopping centre located in Winnipeg. Published Date : 8/7/2014 11:48:00 AM Ivanhoe Cambridge and Sears Canada announced the sale of their stake in Kildonan Place
Ivanhoé Cambridge and Sears Canada announced that it has negotiated an agreement for the sale of their interests in Kildonan Place, a shopping center located Winnipeg. Published Date : 8/7/2014 11:48:00 AM Ivanhoe Cambridge and Sears Canada announce sale of their interests in Kildonan place
Ivanhoe Cambridge and Sears Canada announced that they have entered into an agreement for the sale of their interests in Kildonan Place, a shopping centre located in Winnipeg. Published Date : 8/7/2014 10:23:00 AM Sears Canada issues a voluntary product recall on Joe Boxer boys 3-piece pyjama sets
Sears Canada Inc. is issuing a voluntary product recall today for Joe Boxer licensed boys 3-piece Eat Sleep Play Pyjama Sets that Sears Canada designs and produces under license from Joe Boxer Canada. Published Date : 8/6/2014 12:00:00 AM Sears Canada issues a voluntary product recall for Nevada toddlers and girls Moccasins
Sears Canada is issuing a voluntary product recall for Nevada toddlers and girls moccasins in black, yellow and tan colours. Published Date : 8/5/2014 12:00:00 AM Sears Canada makes appointment to board of directors
Sears Canada, is deeply saddened by the sudden passing of H Ronald Weissman, who has served as a member of the Company's Board of Directors since November, 2013 and was a member of the Audit Committee. Published Date : 7/24/2014 11:19:00 AM RR Donnelley receives partners in progress award from Sears Canada
R. R. Donnelley & Sons Company announced that it has been recognized with the 2013 Sears Canada Inc. Partners in Progress award in recognition of its performance in supporting Sears Canada with catalog and other printing, logistics and related services. Published Date : 7/22/2014 5:29:00 PM Sears Canada enters into development agreement for Calgary North Hill Sears Canada is announcing that it has entered into a binding agreement with Concord Pacific Group of Companies to pursue the development of the 12-acre Sears site located at the North Hill Shopping Centre in Calgary, Alberta. Published Date : 6/18/2014 3:48:00 AM
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Sears Canada announces sale of its minority interest in Trois-Rivières joint arrangement
Sears Canada announced that it has entered into an agreement for the sale of its 15% minority ownership interest in the Centre commercial Les Rivières shopping centre in Trois-Rivières, Quebec, a joint arrangement the Company holds with affiliates of Ivanhoé Cambridge, for pre-tax consideration of $33.5 million. Published Date : 5/16/2014 12:00:00 AM Sears Canada acknowledges Sears Holdings release announcing possible divestiture
Sears Canada Inc. acknowledges the release today by Sears Holdings Corporation (NASDAQ: SHLD) announcing its intention to exp lore strategic alternatives including the potential divestiture of its remaining shares in Sears Canada and/or the sale of Sears Canada as a whole. Published Date : 5/15/2014 8:29:00 AM Sears Holdings provides update on its interest in Sears Canada Inc.
Sears Holdings Corporation announced that it is exploring strategic alternatives for its 51% interest in Sears Canada, including a potential sale of Sears Holdings' interest or Sears Canada as a whole. Published Date : 5/15/2014 5:52:00 AM Sears Holdings explores options for sale of stake in Canadian arm
Department store chain Sears Holdings is exploring strategic alternatives for its 51% interest in multi-channel retailer Sears Canada, including a potential sale of Sears Holdings' interest or Sears Canada as a whole. Published Date : 5/15/2014 5:34:00 AM Sears Canada Issues a voluntary product recall for Whole Home Outdoor Hurricane Candle Holder
Sears Canada Inc. is issuing a voluntary product recall today for a Whole Home Outdoor Hurricane Candle Holders. Published Date : 4/11/2014 12:00:00 AM Sears Canada 2013 annual report now online
Revenue was $3,991.8 million for the 52-week period ended February 1, 2014 ("Fiscal 2013") compared to $4,346.5 million for the 53-week period ended February 2, 2013 ("Fiscal 2012"), a decrease of $354.7 million. Published Date : 3/17/2014 12:00:00 AM JKL T-shirt now available exclusively at Sears Canada
Sears Canada Inc. announced today that customers can now purchase the Alright, Alright, Alright t-shirt, made famous by actor, entrepreneur and philanthropist Matthew McConaughey, at www.sears.ca/jkl or by calling 1-800-26-SEARS. Published Date : 3/12/2014 12:00:00 AM Sears Canada and Style at Home launch exclusive home decor collection Sears Canada Inc. is pleased to announce the exclusive launch of the Style at Home(TM/MC) collection, available at retail stores across Canada, and online at sears.ca/styleathome, beginning today. Published Date : 3/10/2014 12:18:00 PM Sears Canada and Style at Home launch exclusive home decor collection
Sears Canada is pleased to announce the exclusive launch of the Style at Home(TM/MC) collection, available at retail stores across Canada , and online at sears.ca/styleathome, beginning today. Published Date : 3/10/2014 9:08:00 AM Sears Canada pumps up fitness apparel with PURE NRG athletics activewear for Women
New private brand addresses consumer need for affordable performance-driven, high-quality athletic apparel. Published Date : 2/6/2014 12:00:00 AM
Source: Canadean
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14 Appendix
14.1 Methodology
Canadean company reports are based on a core set of research techniques which ensure the best possible level of quality
and accuracy of data. The key sources used include:
Company Websites
Company Annual Reports
SEC Filings
Press Releases
Proprietary Databases
Notes
Financial information of the company is taken from the most recently published annual reports or SEC filings
The financial and operational data reported for the company is as per the industry defined standards
Revenue converted to US$ at average annual conversion rate as of fiscal year end
14.2 Sears Canada, Inc. - Ratio Definitions
Capital Market Ratios
Capital Market Ratios measure investor response to owning a company's stock and also the cost of issuing stock.
Price/Earnings Ratio (P/E)
Price/Earnings (P/E) ratio is a measure of the price paid for a share relative to the annual income earned per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of income, so the stock is more expensive compared to one with lower P/E ratio. A high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. Price per share is as of previous business close, and EPS is from latest annual report.
Formula: Price per Share / Earnings per Share
Enterprise Value/Earnings before Interest, Tax, Depreciation & Amortization (EV/EBITDA)
Enterprise Value/EBITDA (EV/EBITDA) is a valuation multiple that is often used in parallel with, or as an alternative to, the P/E ratio. The main advantage of EV/EBITDA over the PE ratio is that it is unaffected by a company's capital structure. It compares the value of a business, free of debt, to earnings before interest. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report.
Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / (Net Income + Interest + Tax + Depreciation + Amortization)
Enterprise Value/Sales
Enterprise Value/Sales (EV/Sales) is a ratio that provides an idea of how much it costs to buy the company's sales. EV/Sales is seen as more accurate than Price/Sales because market capitalization does not take into account the amount of debt a company has, which needs to be paid back at some point. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report.
Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Sales
Enterprise Value/Operating Profit
Enterprise Value/Operating Profit measures the company's enterprise value to the operating profit. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report.
Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Operating Income
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Enterprise Value/Total Assets
Enterprise Value/Total Assets measures the company's enterprise value to the total assets. Price per share is as of previous business close, and shares outstanding last reported. Other items are from latest annual report.
Formula: (Market Cap + Debt + Preferred Stock - Cash & Cash Equivalents) / Total Assets
Dividend Yield
Dividend Yield shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock.
Formula: Annual Dividend per Share / Price per Share
Equity Ratios
These ratios are based on per share value.
Earnings per Share (EPS)
Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability.
Formula: Net Income / Weighted Average Shares
Dividend per Share
Dividend is the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
Dividend Cover
Dividend cover is the ratio of company's earnings (net income) over the dividend paid to shareholders.
Formula: Earnings per share / Dividend per share
Book Value per Share
Book Value per Share measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly.
Formula: (Shareholders Equity - Preferred Equity) / Outstanding Shares
Cash Value per Share
Cash Value per Share is a measure of a company's cash (cash & equivalents on the balance sheet) that is determined by dividing cash & equivalents by the total shares outstanding.
Formula: Cash & equivalents / Outstanding Shares
Profitability Ratios
Profitability Ratios are used to assess a company's ability to generate earnings, based on revenues generated or resources used. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.
Gross Margin
Gross margin is the amount of contribution to the business enterprise, after paying for direct-fixed and direct variable unit costs.
Formula: {(Revenue-Cost of revenue) / Revenue}*100
Operating Margin
Operating Margin is a ratio used to measure a company's pricing strategy and operating efficiency.
Formula: (Operating Income / Revenues) *100
Net Profit Margin
Net Profit Margin is the ratio of net profits to revenues for a company or business segment - that shows how much of each dollar earned by the company is translated into profits.
Formula: (Net Profit / Revenues) *100
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Profit Markup
Profit Markup measures the company's gross profitability, as compared to the cost of revenue.
Formula: Gross Income / Cost of Revenue
PBIT Margin (Profit Before Interest & Tax)
Profit Before Interest & Tax Margin shows the profitability of the company before interest expense & taxation.
Formula: {(Net Profit + Interest + Tax) / Revenue} *100
PBT Margin (Profit Before Tax)
Profit Before Tax Margin measures the pre-tax income over revenues.
Formula: {Income Before Tax / Revenues} *100
Return on Equity
Return on Equity measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners.
Formula: (Net Income / Shareholders Equity)*100
Return on Capital Employed
Return on Capital Employed is a ratio that indicates the efficiency and profitability of a company's capital investments. ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings.
Formula: EBIT / (Total Assets – Current Liabilities)*100
Return on Assets
Return on Assets is an indicator of how profitable a company is relative to its total assets, the ratio measures how efficient management is at using its assets to generate earnings.
Formula: (Net Income / Total Assets)*100
Return on Fixed Assets
Return on Fixed Assets measures the company's profitability to its fixed assets (property, plant & equipment).
Formula: (Net Income / Fixed Assets) *100
Return on Working Capital
Return on Working Capital measures the company's profitability to its working capital.
Formula: (Net Income / Working Capital) *100
Cost Ratios
Cost ratios help to understand the costs the company is incurring as a percentage of sales.
Operating costs (% of Sales)
Operating costs as percentage of total revenues measures the operating costs that a company incurs compared to the revenues.
Formula: (Operating Expenses / Revenues) *100
Administration costs (% of Sales)
Administration costs as percentage of total revenue measures the selling, general and administrative expenses that a company incurs compared to the revenues.
Formula: (Administrative Expenses / Revenues) *100
Interest costs (% of Sales)
Interest costs as percentage of total revenues measures the interest expense that a company incurs compared to the revenues.
Formula: (Interest Expenses / Revenues) *100
Leverage Ratios
Leverage ratios are used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses.
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Debt to Equity Ratio
Debt to Equity Ratio is a measure of a company's financial leverage. The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries tend to have a higher debt equity ratio.
Formula: Total Liabilities / Shareholders Equity
Debt to Capital Ratio
Debt to capital ratio gives an idea of a company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The higher the debt-to-capital ratio, the more debt the company has compared to its equity. This indicates to investors whether a company is more prone to using debt financing or equity financing. A company with high debt-to-capital ratios, compared to a general or industry average, may show weak financial strength because the cost of these debts may weigh on the company and increase its default risk.
Formula: {Total Debt / (Total assets - Current Liabilities)}
Interest Coverage Ratio
Interest Coverage Ratio is used to determine how easily a company can pay interest on outstanding debt, calculated as earnings before interest & tax by interest expense.
Formula: EBIT / Interest Expense
Liquidity Ratios
Liquidity ratios are used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern.
Current Ratio
Current Ratio measures a company's ability to pay its short-term obligations. The ratio gives an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point.
Formula: Current Assets / Current Liabilities
Quick Ratio
Quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets.
Formula: (Current Assets - Inventories) / Current Liabilities
Cash Ratio
Cash ratio is the most stringent and conservative of the three short-term liquidity ratio. It only looks at the most liquid short-term assets of the company, which are those that can be most easily used to pay off current obligations. It also ignores inventory and receivables, as there are no assurances that these two accounts can be converted to cash in a timely matter to meet current liabilities.
Formula: {(Cash & Bank Balance + Marketable Securities) / Current Liabilities)}
Efficiency Ratios
Efficiency ratios measure a company's effectiveness in various areas of its operations, essentially looking at maximizing its use of resources.
Fixed Asset Turnover
Fixed Asset Turnover ratio indicates how well the business is using its fixed assets to generate sales. A higher ratio indicates the business has less money tied up in fixed assets for each currency unit of sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets.
Formula: Net Sales / Fixed Assets
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Asset Turnover
Asset turnover ratio measures the efficiency of a company's use of its assets in generating sales revenue to the company. A higher asset turnover ratio shows that the company has been more effective in using its assets to generate revenues.
Formula: Net Sales / Total Assets
Current Asset Turnover
Current Asset Turnover indicates how efficiently the business uses its current assets to generate sales.
Formula: Net Sales / Current Assets
Inventory Turnover
Inventory Turnover ratio shows how many times a company's inventory is sold and replaced over a period. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying.
Formula: Cost of Goods Sold / Inventory
Working Capital Turnover
Working Capital Turnover is a measurement to compare the depletion of working capital to the generation of sales. This provides some useful information as to how effectively a company is using its working capital to generate sales.
Formula: Net Sales / Working Capital
Capital Employed Turnover
Capital employed turnover ratio measures the efficiency of a company's use of its equity in generating sales revenue to the company.
Formula: Net Sales / Shareholders Equity
Capex to sales
Capex to Sales ratio measures the company's expenditure (investments) on fixed and related assets' effectiveness when compared to the sales generated.
Formula: (Capital Expenditure / Sales) *100
Net income per Employee
Net income per Employee looks at a company's net income in relation to the number of employees they have. Ideally, a company wants a higher profit per employee possible, as it denotes higher productivity.
Formula: Net Income / No. of Employees
Revenue per Employee
Revenue per Employee measures the average revenue generated per employee of a company. This ratio is most useful when compared against other companies in the same industry. Generally, a company seeks the highest revenue per employee.
Formula: Revenue / No. of Employees
Efficiency Ratio
Efficiency Ratio is used to calculate a bank's efficiency. An increase means the company is losing a larger percentage of its income to expenses. If the efficiency ratio is getting lower, it is good for the bank and its shareholders.
Formula: Non-interest expense / Total Interest Income Source : Canadean
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14.3 Disclaimer
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The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the
findings, conclusions and recommendations that Canadean delivers will be based on information gathered in good faith from
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accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.
Reproduced with permission of the copyright owner. Further reproduction prohibited withoutpermission.
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