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Sears Canada Earnings 2012: Target's Arrival Casts Doubt On Canadian Outlets

Slipping sales during the holiday season — a time where retailers typically earn up to 40 per cent of their annual revenue — has cast a shadow of doubt on the future of Sears Canada reports the CBC.

According to a release by the Sears Holding Corporation, Sears Canada's parent company, same-store-sales fell by 5.8 per cent for the Canadian retailer in the nine weeks ending on Dec. 29. Same-store-sales are considered a strong indicator of a retailer's growth by comparing the difference in revenue outlets make over the same time period. Sears Holding attributes the poor sales "primarily to a decline in electronics, as well as the impacts of unseasonably warm temperatures in most parts of Canada," as noted in the company's release. Fourth quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are also expected to fall too half of last year's $97-million.

In an interview with the Toronto Star, Sears' CEO says that while sales in electronics fell, the company made gains in other areas.

“On the positive, our apparel and accessories was positive in December, well above trend for us,” said Sears CEO Calvin McDonald, adding that consumer confidence and the cool housing market played a role in the consumers purchasing major appliances and mattresses.

The loss comes at a time as Sharon Driscoll, the company's chief financial officer, abruptly left the company to pursue other interests. Meanwhile, Sears Canada has been abandoning ailing store outlets and selling back leases to landlords in order to make way for new retailers like Nordstrom. It's a move which some analysts has caused a battle between Sears and Target, a U.S. retailer set to arrive in Canada this year.

"Calvin McDonald has been moving Sears to a more contemporary image in Canada that is head-on with Target,” said Wendy Evans, president of retail consultancy at Evans & Co. Consultants Inc in an interview with the Financial Post. “He has done a great job improving the assortment, but the challenge is to move that much merchandise and change that many stores in the little time as he has had. It is a huge challenge.”

Evans also told the Financial Post that Sears' poor earnings only make it a larger target for U.S. retailers — like Nordstrom or Macy's — looking to expand into Canada.

As the Huffington Post Canada reported earlier, Canada is attractive to U.S. retailers for several reasons, one of them being the shrinking number of local retailers. And when it comes to shrinkage, Sears Canada is all to familiar with the concept: the company has recorded six consecutive years of declines in revenue at stores opened at least a year, reports the CBC.

With Files From the Canadian Press

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