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Sears Canada Reports Third Quarter Results

TORONTO, Nov. 13, 2012 /CNW/ - Sears Canada Inc. (TSX: SCC) today announced 
its unaudited third quarter results. Total revenues for the 13-week period 
ended October27, 2012 were $1,037.5 million compared to $1,113.2 million for 
the 13-week period ended October29, 2011, a decrease of 6.8%. Same store 
sales decreased by 5.7% during this period. 
The net loss for Q3 was $21.9 million or 22 cents per share compared to a net 
loss of $44.1 million or 42 cents per share in the third quarter last year. 
Included in the net loss for the quarter last year is a $45.6 million pre-tax 
charge relating to the disposition of excess inventory and internal 
restructuring costs. Adjusted EBITDA (Earnings Before Interest, Taxes, 
Depreciation and Amortization and Non-Operating Activities) for Q3 2012 was 
$(3.0) million versus $14.5 million in the same 13-week period last year. 
Total revenues for the 39-week period ended October27, 2012 were $3,002.7 
million compared to $3,253.4 million for the 39-week period ended October29, 
2011, a decrease of 7.7%. Same store sales decreased by 6.4% during this 
period. 
Net earnings for the 39-week period ended October27, 2012 was $61.3 million 
or 60 cents per share compared to a net loss of $91.3 million or 87 cents per 
share for the 39-week period ended October29, 2011. This year's net 
earnings include a pre-tax gain of $167.1 million relating to the early 
surrender and return of leases on four properties. Included in the net loss 
for the 39-week period ended October29, 2011 is a $45.6 million pre-tax 
charge, the same as described in the second paragraph of this release. 
Adjusted EBITDA for the first nine months of the year was $(15.4) million 
versus $22.2 million for the same period last year. 
Commenting on the quarter, Calvin McDonald, President and Chief Executive 
Officer, Sears Canada Inc. said, "Our decrease in revenue was primarily due to 
a significant reduction in promotional and clearance sales in apparel, 
declines in pre-season sales of snowblowers, and the planned exiting of 
certain product lines and reduced sales of televisions in electronics. We 
carefully managed expenses and reduced our spend in payroll and marketing and 
advertising expenses. 
"We continue to make progress in our transformation strategy and are seeing 
positive signs of success," continued Mr. McDonald. "For example, even though 
we cycled over our attack plan from last year in major appliances and 
mattresses, we continue to see strength in these two key hero categories. The 
Baby's Room, another key hero category, which we launched in June, has 
experienced positive sales increases since this time over the previous year. 
In addition, we experienced positive sales with our Back to School program, 
both key indicators that we are attracting a younger, family oriented customer. 
"Although we made progress in the quarter, we can and must do more. Our plan 
is working, however our pace of execution has not met our expectations. Recent 
changes to our management team have been made that are designed to lead the 
organization effectively through the Transformation and help us achieve our 
operational and financial objectives." 
This release contains information which is forward-looking and is subject to 
important risks and uncertainties. Forward-looking information concerns the 
Company's future financial performance, business strategy, plans, goals and 
objectives. Factors which could cause actual results to differ materially 
from current expectations include, but are not limited to: the ability of the 
Company to successfully implement its cost reduction, productivity improvement 
and strategic initiatives and whether such initiatives will yield the expected 
benefits; the results achieved pursuant to the Company's long-term marketing 
and servicing alliance with JPMorgan Chase Bank, N.A.; general economic 
conditions; competitive conditions in the businesses in which the Company 
participates; changes in consumer spending; seasonal weather patterns; 
customer preference toward product offerings; changes in the Company's 
relationship with its suppliers; interest rate fluctuations and other changes 
in funding costs; fluctuations in foreign currency exchange rates; the 
possibility of negative investment returns in the Company's pension plan; 
the outcome of pending legal proceedings; and changes in laws, rules and 
regulations applicable to the Company. While the Company believes that its 
forecasts and assumptions are reasonable, results or events predicted in this 
forward-looking information may differ materially from actual results or 
events. 
Adjusted EBITDA is a non-IFRS measure; please refer to the table attached for 
a reconciliation of net (loss) earnings to Adjusted EBITDA. 
Sears Canada is a multi-channel retailer with a network that includes 195 
corporate stores, 269 hometown dealer stores, 8 home services showrooms, over 
1,500 catalogue and online merchandise pick-up locations, 102 Sears Travel 
offices and a nationwide home maintenance, repair, and installation network. 
The Company also publishes Canada's most extensive general merchandise 
catalogue and offers shopping online at www.sears.ca. 
SEARS CANADA INC.                                                       
RECONCILIATION OF NET (LOSS) EARNINGS TO
OPERATING EBITDA                                                        
For the 13 and 39-week periods ended October                 
27, 2012 and October 29, 2011 
Unaudited                                                               
                       Third Quarter                Year-to-Date 
(in CAD millions,
except per share                   2011                        2011
amounts)                2012    (Recast)(6)         2012    (Recast)(2) 
Net (loss)                    $
earnings           $   (21.9)        (44.1)    $     61.3 $      (91.3) 
Transformation               
  expense(1)                -          45.6             -          45.6 
Gain on lease                
  terminations(2)       (2.8)             -       (167.1)             - 
Accelerated
  tenant                       
  inducement
  amortization(3)       (2.0)             -         (4.0)             - 
Lease exit costs             
  (4)                     4.6             -           6.0             - 
Depreciation and
  amortization                 
  expense                28.2          28.3          85.2          86.1 
Finance costs           2.7           2.4          10.9          12.0 
Interest income       (0.5)         (0.4)         (3.3)         (1.3) 
Share of income
  from joint                   
  ventures              (3.0)         (1.4)         (9.4)         (6.8) 
Income tax
  (recovery)                   
  expense               (8.3)        (15.9)           5.0        (22.1) 
Adjusted EBITDA(5) $    (3.0) $        14.5    $   (15.4) $        22.2 
Basic net (loss)              $
earnings per share $   (0.22)        (0.42)    $     0.60 $      (0.87) 


                                                                       

1       Transformation expense relates to a charge for disposition of
        excess inventory and internal restructuring costs within our
        Home Services business
        unit.

2       Gain on lease terminations represents the pre-tax gain on the
        early surrender and return of leases on four properties.

3       Accelerated tenant inducement amortization represents the
        accelerated amortization of lease inducements relating to three
        of the properties referred to in footnote 1 above.

4       Lease exit costs represent costs incurred to exit properties
        referred to in footnote 1 above.

5       Adjusted EBITDA is a measure used by management, the retail
        industry and investors as an indicator of the Company's
        performance, ability to
        incur and service debt, and as a valuation metric. Adjusted
        EBITDA is a non-IFRS measure.

6       Recast to reflect the changes resulting from the retrospective
        application of the change in accounting policy related to the
        early adoption of the
        amendments to accounting standard "IAS 19 (Revised), Employee
        Benefits".



 
TABLE OF CONTENTS  


    Unaudited Condensed Consolidated Financial Statements

  Condensed Consolidated Statements of Financial Position

  Condensed Consolidated Statements of Net (Loss) Earnings and
  Comprehensive (Loss) Income

  Condensed Consolidated Statements of Changes in Shareholders' Equity

  Condensed Consolidated Statements of Cash Flows

Notes to the Unaudited Condensed Consolidated Financial Statements

  Note 1: General information

  Note 2: Significant accounting policies

  Note 3: Issued standards not yet adopted

  Note 4: Critical accounting judgments and key sources of estimation
  uncertainty

  Note 5: Cash and cash equivalents

  Note 6: Inventories

  Note 7: Long-term obligations

  Note 8: Capital stock

  Note 9: Revenue

  Note 10: Retirement benefit plans

  Note 11: Depreciation and amortization expense

  Note 12: Gain on lease terminations

  Note 13: Sale of Cantrex Group Inc. ("Cantrex")

  Note 14: Financial instruments

  Note 15: Contingent liabilities, commitments and guarantees

  Note 16: Net (loss) earnings per share

  Note 17: Income taxes

  Note 18: Operating segments

  Note 19: Changes in non-cash working capital balances

  Note 20: Changes in long-term assets and liabilities

  Note 21: Subsequent Events

  Note 22: Approval of unaudited condensed consolidated financial
  statements
    



SEARS CANADA INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited 


                                               As at             As at
                                As at    January 28,       October 29,
                                                2012              2011

 (in CAD        Notes     October 27,      (Recast -    (Recast - Note
millions)                        2012    Note 2.4.1)            2.4.1)

ASSETS                                                   

Current                                                  
assets

Cash and cash 5,14,15   $       226.8  $       397.4  $          180.1
equivalents

Accounts
receivable,       14             94.1          116.2             134.7
net

Income taxes      17             21.8            4.1               9.4
recoverable

Inventories        6          1,006.2          823.9             995.0

Prepaid                          31.9           27.9              36.2
expenses

Total current                 1,380.8        1,369.5           1,355.4
assets

Non-current                                              
assets

Property,
plant and                       845.5          872.0             876.9
equipment

Investment                       21.7           21.7              21.7
property

Retirement    2.4.1,10              -              -               5.7
benefit asset

Intangible                       24.5           23.6              22.9
assets

Goodwill                          8.7            8.7              11.2

Investment in
joint                           294.6          301.4             305.9
ventures

Deferred tax    2.4.1            93.3           84.6              85.7
assets

Other
long-term     7,14,17            35.6           49.2              59.6
assets

Total assets            $     2,704.7  $     2,730.7  $        2,745.0

LIABILITIES                                              

Current                                                  
liabilities

Accounts
payable and       14    $       635.8  $       576.8  $          754.2
accrued
liabilities

Deferred                        192.6          208.0             207.3
revenue

Provisions                       56.2           64.8              68.5

Income taxes      17              0.2            1.0               1.8
payable

Other taxes       17             18.4           42.8              24.8
payable

Derivative
financial         14                -              -               1.1
liabilities

Principal
payments on
long-term        7,14             5.3            5.1               5.4
obligations
due within
one year

Total current                   908.5          898.5           1,063.1
liabilities

Non-current                                              
liabilities

Long-term        7,14            32.1          117.6              25.6
obligations

Deferred                         88.9           89.2              88.2
revenue

Retirement
benefit       2.4.1,10          450.8          452.3             344.7
liability

Deferred tax  2.4.1,17            5.5            5.3               5.8
liabilities

Other
long-term                        74.0           75.8              77.8
liabilities

Total                         1,559.8        1,638.7           1,605.2
liabilities

SHAREHOLDERS'                                            
EQUITY

Capital stock      8             14.9           15.0              15.1

Retained      2.4.1,8         1,270.2        1,218.5           1,188.2
earnings

Accumulated
other           2.4.1         (140.2)        (141.5)            (63.5)
comprehensive
loss

Total
shareholders'                 1,144.9        1,092.0           1,139.8
equity

Total
liabilities
and                     $     2,704.7  $     2,730.7  $        2,745.0
shareholders'
equity

The accompanying notes are an integral part of these condensed consolidated 
financial statements.
    

SEARS CANADA INC.
CONDENSED CONSOLIDATED STATEMENTS OF NET (LOSS) EARNINGS
AND COMPREHENSIVE (LOSS) INCOME
For the 13 and 39-week periods ended October27, 2012 and October29, 2011 
Unaudited
                                          13-Week Period         39-Week Period
                                                     2011                    2011


                                              (Recast                 (Recast
 (in CAD millions,                                      -                       -
except per share                                     Note                    Note
amounts)                    Notes         2012     2.4.1)        2012      2.4.1) 
Revenue                                                    $                      
                           9     $ 1,037.5  $ 1,113.2     3,002.7  $  3,253.4 
Cost of goods and                                           
services sold                  6         657.5      727.3     1,900.5     2,067.7 
Selling,
administrative and                                          
other expenses       2.4.1,10,11,14      413.8      445.3     1,204.8     1,295.2 
Operating loss                          (33.8)     (59.4)     (102.6)     (109.5) 
Gain on lease                                               
terminations                  12           2.8          -       167.1           - 
Finance costs               7,17           2.7        2.4        10.9        12.0 
Interest income                5           0.5        0.4         3.3         1.3 
Share of income
from joint                                                  
ventures                                   3.0        1.4         9.4         6.8 
(Loss) earnings
before income                                               
taxes                                   (30.2)     (60.0)        66.3     (113.4) 
Income tax                                                  
recovery (expense)                                                                
Current                     17         (1.1)      (4.7)      (12.1)      (31.0) 
Deferred               2.4.1,17          9.4       20.6         7.1        53.1 
                                       8.3       15.9       (5.0)        22.1 
Net (loss)                                                 $
earnings                             $  (21.9)  $  (44.1)        61.3  $   (91.3) 
Basic net (loss)                                           $
earnings per share       2.4.1,16    $  (0.22)  $  (0.42)        0.60  $   (0.87) 
Diluted net (loss)                                         $
earnings per share       2.4.1,16    $  (0.22)  $  (0.42)        0.60  $   (0.87) 
Net (loss)                                                 $
earnings                             $  (21.9)  $  (44.1)        61.3  $   (91.3) 
Other
comprehensive                                               
income (loss), net
of taxes:                                                                         
Tax rate
  adjustment on
  pension                                                   
  remeasurement
  losses                                     -          -         1.3           - 
Mark-to-market
  adjustment on                                             
  cash equivalents                           -        0.1           -           - 
Gain (loss) on
  foreign exchange                                          
  derivatives                                -        4.9           -       (5.0) 
Reclassification
  to net (loss)
  earnings of loss                                          
  (gain) on
  foreign exchange
  derivatives                                -        3.0           -         6.9 
Other
comprehensive                                               
income (loss)                                -        8.0         1.3         1.9 
Comprehensive                                              $
(loss) income                        $  (21.9)  $  (36.1)        62.6  $   (89.4) 
The accompanying notes are an integral part of these condensed consolidated 
financial statements. 


    

SEARS CANADA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the 13 and 39-week periods ended October27, 2012 and October29, 2011

Unaudited
                                                               Mark-to-market
                                                                on short-term      Foreign exchange


                                                       investments within           derivatives                     
Accumulated other 
                                           Retained         cash and cash    designated as cash    Remeasurement     
comprehensive    Shareholders'
(in CAD millions)    Notes    Capital stock    earnings           equivalents           flow hedges      (loss) gain     
(loss) income           equity 
Balance as at July                                                          -
28, 2012                    $          14.9 $   1,292.1  $                     $                0.2 $        (140.4)  $  
      (140.2)  $       1,166.8 
Comprehensive loss                                                                                                       
                               
Net loss                                       (21.9)                                                                  
            -           (21.9) 
Total                                                                       -
comprehensive loss                        -      (21.9)                                           -                -     
            -           (21.9) 
Repurchases of                                                            -
  common shares         8                 -           -                                           -                -     
            -                - 
Balance as at                                                               -
October 27, 2012            $          14.9 $   1,270.2  $                     $                0.2  $       (140.4)  $  
      (140.2)  $       1,144.9 
(Recast - Note                                                               
2.4.1)                                                                                                                   
                               
Balance as at July                                                      (0.1)
30, 2011                   $           15.2  $  1,234.8  $                     $              (8.8)  $        (62.6)  $  
       (71.5)  $       1,178.5 
Comprehensive loss                                                                                                       
                               
Net loss                                       (44.1)                                                                  
            -           (44.1) 
Other
comprehensive                                                                
income                                                                                                                   
                               
Mark-to-market                                                          0.1
  loss                                                                                                                   
          0.1              0.1 
Gain on foreign
  exchange                                                                   
  derivatives                                                                                   4.9                      
          4.9              4.9 
Reclassification
  of loss on                                                                 
  foreign exchange
  derivatives                                                                                   3.0                      
          3.0              3.0 
Total other
comprehensive                                                             0.1
income                                    -           -                                         7.9                -     
          8.0              8.0 
Total
comprehensive                                                             0.1
(loss) income                             -      (44.1)                                         7.9                -     
          8.0           (36.1) 
Repurchases of                                                            -
  common shares         8             (0.1)       (2.5)                                           -                -     
            -            (2.6) 
Balance as at                                                               -
October 29, 2011            $          15.1  $  1,188.2  $                     $              (0.9)  $        (62.6)  $  
       (63.5)  $       1,139.8 
(Recast - Note                                                               
2.4.1)                                                                                                                   
                               
Balance as at                                                               -
January 28, 2012            $          15.0  $  1,218.5  $                     $                0.2  $       (141.7)  $  
      (141.5)  $       1,092.0 
Comprehensive                                                                
income                                                                                                                   
                               
Net income                                       61.3                                                                  
            -             61.3 
Other
comprehensive                                                                
income                                                                                                                   
                               
Tax rate
  adjustment on
  pension                                                                    
  remeasurement
  losses                                                                                                         1.3     
          1.3              1.3 
Total other
comprehensive                                                               -
income                                    -           -                                           -              1.3     
          1.3              1.3 
Total
comprehensive                                                               -
income                                    -        61.3                                           -              1.3     
          1.3             62.6 
Repurchases of                                                            -
  common shares         8             (0.1)       (9.6)                                           -                -     
            -            (9.7) 
Balance as at                                                               -
October 27, 2012            $          14.9  $  1,270.2  $                     $                0.2  $       (140.4)  $  
      (140.2)  $       1,144.9 
(Recast - Note                                                               
2.4.1)                                                                                                                   
                               
Balance as at                                                               -
January 29, 2011            $          15.4  $  1,310.4 $                      $              (2.8)  $        (62.6)  $  
       (65.4)  $       1,260.4 
Comprehensive loss                                                                                                       
                               
Net loss                                       (91.3)                                                                  
            -           (91.3) 
Other
comprehensive                                                                
(loss) income                                                                                                            
                               
Loss on foreign
  exchange                                                                   
  derivatives                                                                                 (5.0)                      
        (5.0)            (5.0) 
Reclassification
  of gain on                                                                 
  foreign exchange
  derivatives                                                                                   6.9                      
          6.9              6.9 
Total other
comprehensive                                                               -
(loss) income                             -           -                                         1.9                -     
          1.9              1.9 
Total
comprehensive                                                               -
(loss) income                             -      (91.3)                                         1.9                -     
          1.9           (89.4) 
Repurchases of                                                            -
  common shares         8             (0.3)      (30.9)                                           -                -     
            -           (31.2) 
Balance as at                                                               -
October 29, 2011            $          15.1  $  1,188.2  $                     $              (0.9)  $        (62.6) $   
       (63.5)  $       1,139.8 
The accompanying notes are an integral part of these condensed consolidated 
financial statements. 


    

SEARS CANADA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the 13 and 39-week periods ended October27, 2012 and October29, 2011 
Unaudited
                               13-Week Period          39-Week Period
                                           2011                    2011
                                        (Recast                 (Recast


                                          -                       -
 (in CAD                                   Note                    Note
millions)          Notes       2012      2.4.1)        2012      2.4.1) 
Cash flow (used
for) generated                                                
from operating
activities                                                              
Net (loss)              $          $           $           $
  earnings                   (21.9)      (44.1)        61.3      (91.3) 
Adjustments                                                 
  for:                                                                  
Depreciation 
and                                                         
amortization 
expense           11        28.2        28.3        85.2        86.1 
Reversal of 
impairment                                                  
losses            12           -           -       (2.1)           - 
Loss on 
disposal of 
property,                                                   
plant and 
equipment                    1.2         1.0         0.9         0.8 
Gain on 
lease                                                       
terminations      12       (2.8)           -     (167.1)           - 
Finance                                                     
costs              7         2.7         2.4        10.9        12.0 
Interest                                                    
income             5       (0.5)       (0.4)       (3.3)       (1.3) 
Share of 
income from                                                 
joint 
ventures                   (3.0)       (1.4)       (9.4)       (6.8) 
Retirement 
benefit                                                     
plans 
expense           10         8.0         7.3        23.8        22.7 
Short-term 
disability                                                  
expense           10         1.6         1.7         5.9         6.0 
Income tax 
expense                                                     
(recovery)        17       (8.3)      (15.9)         5.0      (22.1) 
Interest                                                    
  received            5         0.5         0.3         1.6         1.3 
Interest paid       7       (1.3)       (0.7)       (3.8)       (0.7) 
Retirement
  benefit plans                                               
  contributions      10      (11.1)       (8.0)      (31.1)      (15.0) 
Income tax
  (payments)                                                  
  refunds, net       17       (3.5)         2.7         0.7      (37.7) 
Other income
  tax                                                         
  (deposits)
  receipts, net      17      (15.2)      (11.7)      (15.2)      (11.7) 
Changes in
  non-cash                                                    
  working
  capital            19      (67.9)        49.3     (190.4)      (10.9) 
Changes in
  long-term                                                   
  assets and
  liabilities        20       (3.2)         4.2        28.2         2.4 
                         (96.5)        15.0     (198.9)      (66.2) 
Cash flow (used
for) generated                                                
from investing
activities                                                              
Purchases of
  property,
  plant and                                                   
  equipment and
  intangible
  assets                     (20.1)      (21.9)      (52.4)      (56.0) 
Proceeds from
  sale of
  property,                                                   
  plant and
  equipment                     0.9         0.3         1.8         0.6 
Proceeds from
  lease                                                       
  terminations       12         5.0           -       175.0           - 
Proceeds from
  sale of                                                     
  Cantrex
  operations         13           -           -         3.5           - 
Dividends
  received from                                               
  joint
  ventures                      5.8         5.0        16.8        14.1 


                              (8.4)      (16.6)       144.7      (41.3)

Cash flow used
for financing                                                 
activities                                                             

  Interest paid
  on finance                                                  
  lease
  obligations         7       (0.8)       (0.5)       (1.7)       (1.6)

  Repayment of
  long-term                                                   
  obligations                 (2.5)       (2.3)     (139.3)     (115.6)

  Proceeds from
  long-term                                                   
  obligations                   1.3         1.0        34.3         3.9

  Repurchases
  of common                                                   
  shares              8           -      (10.1)       (9.7)      (31.2)
                          $          $           $           $        
                              (2.0)      (11.9)     (116.4)     (144.5)

Effect of
exchange rate
on cash and                                                   
cash
equivalents at
end of period                   0.2         0.7           -       (0.2)

Decrease in
cash and cash             $          $           $           $        
equivalents                 (106.7)      (12.8)     (170.6)     (252.2)

Cash and cash
equivalents at            $          $           $           $
beginning of
period                        333.5       192.9       397.4       432.3

Cash and cash
equivalents at            $          $           $           $
end of period                 226.8       180.1       226.8       180.1

The accompanying notes are an integral part of these condensed consolidated 
financial statements. 
    

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General information

Sears Canada Inc. is incorporated in Canada. The address of its registered 
office and principal place of business is 290 Yonge Street, Suite 700, 
Toronto, Ontario, Canada M5B 2C3. The principal activities of Sears Canada 
Inc. and its subsidiaries (the "Company") include the sale of goods and 
services through the Company's Retail channel, which includes its Full-line, 
Sears Home, Hometown Dealer, Outlet, Appliances and Mattresses, Corbeil 
Electrique Inc. ("Corbeil") stores, and its Direct (catalogue/internet) 
channel. It also includes service revenue related to product repair, home 
improvement, and logistics. Commission revenues include travel, insurance, and 
performance payments received from JP Morgan Chase& Co, N.A. (Toronto 
Branch) ("JP Morgan Chase") under the Company's long-term credit card 
marketing and servicing alliance with JP Morgan Chase. The Company has 
partnered with Thomas Cook Canada Inc. ("Thomas Cook") in a multi-year 
licensing arrangement, under which Thomas Cook manages the day-to-day 
operations of all Sears Travel offices. Licensee fee revenues are comprised of 
payments received from licensees that operate within the Company's stores. The 
Company is a party to a number of joint ventures which have been classified as 
jointly controlled entities for financial reporting purposes. These joint 
ventures are jointly controlled by the venturers who are entitled to a share 
of the joint ventures' income or loss.

The immediate parent of the Company is Sears Holdings Corporation ("Sears 
Holdings"), incorporated in the U.S. in the state of Delaware. The ultimate 
controlling party of the Company is ESL Investments, Inc. (incorporated in the 
U.S. in the state of Delaware) through Sears Holdings.

2. Significant accounting policies

2.1 Statement of compliance

The unaudited condensed consolidated financial statements of the Company for 
the 13 and 39-week periods ended October27, 2012 (the "Financial 
Statements") have been prepared in accordance with IAS 34, Interim Financial 
Reporting ("IAS 34") as issued by the International Accounting Standards Board 
("IASB"), and therefore, do not contain all disclosures required by 
International Financial Reporting Standards ("IFRS") for annual financial 
statements. Accordingly, these Financial Statements should be read in 
conjunction with the Company's most recently prepared recast annual 
consolidated financial statements for the 52-week period ended January28, 
2012 (the "recast 2011 Annual Consolidated Financial Statements"), prepared in 
accordance with IFRS.

2.2 Basis of preparation and presentation

The principal accounting policies of the Company have been applied 
consistently in the preparation of these Financial Statements for all periods 
presented. These Financial Statements follow the same accounting policies and 
methods of application as those used in the preparation of the recast 2011 
Annual Consolidated Financial Statements. The Company's significant accounting 
policies are described in Note 2 of the recast 2011 Annual Consolidated 
Financial Statements.

The Company's Financial Statements incorporate the financial statements of the 
Company as well as all of its subsidiaries. Real estate joint venture 
investments are accounted for using the equity method of accounting (described 
in Note 2.13 of the recast 2011 Annual Consolidated Financial Statements). 
Subsidiaries include all entities where the Company has the power to govern 
the financial and operating policies of the entity so as to obtain benefits 
from its activities. All intercompany balances and transactions, and any 
unrealized income and expenses arising from intercompany transactions, are 
eliminated in the preparation of these Financial Statements.

The fiscal year of the Company consists of a 52 or 53-week period ending on 
the Saturday closest to January31. The 13 and 39-week periods presented in 
these Financial Statements are for the periods ending October27, 2012 and 
October29, 2011.

These Financial Statements are presented in Canadian dollars, which is Sears 
Canada Inc. and its subsidiaries' functional currency.

2.3 Seasonality

The Company's operations are seasonal in nature. Accordingly, merchandise and 
service revenues, as well as performance payments received from JP Morgan 
Chase under the long-term credit card marketing and servicing alliance, will 
vary by quarter based on consumer spending behaviour. Historically, the 
Company's revenues and earnings are highest in the fourth quarter due to the 
holiday season. The Company is able to adjust certain variable costs in 
response to seasonal revenue patterns; however, costs such as occupancy are 
fixed, causing the Company to report a disproportionate level of earnings in 
the fourth quarter. This business seasonality results in quarterly performance 
that is not necessarily indicative of the year's performance.

2.4 Changes in accounting policies

2.4.1 IAS 19 (Revised), Employee Benefits ("IAS 19")

In Q1 2012, the Company elected to early adopt IAS 19 (Revised), which 
includes amendments to IAS 19, e.g. the elimination of the "corridor 
approach", which previously allowed for the option to defer and amortize the 
recognition of actuarial gains and losses. The significant amendments to IAS 
19 are as follows:
    --  The "corridor approach" is to be replaced with full and
        immediate recognition of actuarial gain and loss remeasurements
        in "Other comprehensive income (loss)" ("OCI");
    --  Retirement benefit costs are to consist of service costs, net
        interest and remeasurements, with remeasurements being recorded
        in OCI;
    --  Past service costs are to be recognized immediately in the
        Consolidated Statements of Net (Loss) Earnings;
    --  Expected returns on plan assets will no longer be recognized in
        profit or loss. Instead, interest income on plan assets,
        calculated using the discount rate used to measure the pension
        obligation, will be recognized in the Consolidated Statements
        of Net (Loss) Earnings;
    --  Plan administration costs are to be expensed as incurred; and
    --  Disclosures relating to retirement benefit plans will be
        enhanced and will include discussions on risk associated with
        each plan, an explanation of items recognized in the
        consolidated financial statements and descriptions of the
        amount, timing and uncertainty on the Company's future cash
        flow.

The amendments to IAS 19 are effective for annual periods beginning on or 
after January 1, 2013 with early adoption permitted.

The amendments are required to be applied retrospectively in accordance with 
IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. In 
connection with the partial spin-off announced by Sears Holdings in Q2 2012, 
the Company was required to file a Form 20-F for foreign private issuers with 
the United States Securities and Exchange Commission ("SEC"). As the Company 
adopted the amendments to IAS 19 in Q1 2012, the Company was required to 
retrospectively recast the adoption to its annual Consolidated Financial 
Statements within the Form 20-F with the effect of recasting extended to the 
transition date of January 31, 2010. The Company has recast the assets and 
liabilities as at January28, 2012, January29, 2011 and January31, 2010 
and the income, expenses and cash flows for the 52-week periods ended 
January28, 2012 and January29, 2011. The impact to the opening 
Consolidated Statement of Financial Position as at January 31, 2010, and to 
the income, expenses and cash flows for the 52-week period ended January29, 
2011, are described in Note 2.26 of the recast 2011 Annual Consolidated 
Financial Statements. In addition, the Company recast its annual required 
disclosures to comply with the amendments to IAS 19 (Revised) in Note 20 of 
the recast 2011 Annual Consolidated Financial Statements.

Recast of financial statement captions

A summary of the impact arising from the application of the change in 
accounting policy is as follows:

Consolidated Statements of Financial Position

(Increase                 As at                  As at           As at
(decrease) in       January 28,       October 29, 2011     January 29,
CAD millions)              2012                                   2011

  Retirement      $     (187.7)     $          (185.9)   $     (197.4)
  benefit asset

  Retirement              308.2                  206.8           205.3
  benefit
  liability

Net change to           (495.9)                (392.7)         (402.7)
retirement
benefit asset
and liability

  Deferred tax             84.0                   85.1            32.7
  assets

  Deferred tax           (43.6)                 (16.1)          (71.0)
  liabilities

Net change to             127.6                  101.2           103.7
deferred tax
assets and
liabilities

Accumulated             (141.7)                 (62.6)          (62.6)
other
comprehensive
loss

Retained                (226.6)                (228.9)         (236.4)
earnings
                                       

Consolidated Statements of Net (Loss) Earnings and Comprehensive (Loss) Income
                 13-Week     13-Week   39-Week                 52-Week


              Period      Period    Period     39-Week      Period
(Increase          Ended       Ended     Ended      Period       Ended
(decrease) in    October     October   October       Ended     January
CAD millions,        27,    29, 2011       27,     October         28,
except per          2012                  2012         29,        2012
share amounts)                                        2011 
Selling,       $   (6.1)   $   (3.3)    (18.3)   $   (9.9)   $  (13.2)
administrative                       $
and other
expenses 
Earnings             6.1         3.3      18.3         9.9        13.2
before income                                                 
taxes                                  
Deferred             1.6         0.8       4.8         2.4         3.4
income tax                                                    
expense                                
                 4.5         2.5      13.5         7.5         9.8 
                                                          
Net earnings                           
Basic net      $    0.04   $    0.02      0.13   $    0.07   $    0.09
earnings per                         $
share 
Diluted net    $    0.04        0.02 $    0.13        0.07        0.09
earnings per               $                     $           $
share 
Other            —     —       1.3     —      (79.1)
comprehensive                                                 
income (loss)                          
                 4.5         2.5      14.8         7.5      (69.3)
Comprehensive                                                 
income (loss)                          
Consolidated Statements of Cash Flows 


                                                                     
             13-Week                  39-Week     39-Week     52-Week


          Period      13-Week      Period      Period      Period
(Increase      Ended       Period       Ended       Ended       Ended
(decrease)   October        Ended     October     October     January
in CAD           27,      October         27,         29,         28,
millions)       2012     29, 2011        2012        2011        2012 
Net        $           $            $           $           $
earnings         4.5          2.5        13.5         7.5           9.8 
Retirement                                                   
benefit
plans
expense        (6.1)        (3.3)      (18.3)       (9.9)      (13.2) 
Income tax                                                   
expense          1.6          0.8         4.8         2.4         3.4 
Refer to the Company's Fiscal 2012 first quarter unaudited condensed 
consolidated financial statements for additional disclosures relating to the 
early adoption of IAS 19 (Revised). 
In addition, the Company has separately disclosed "Other income tax (deposits) 
receipts, net" of $11.7 million for both the 13 and 39-week periods ended 
October 29, 2011 in the Condensed Consolidated Statements of Cash Flows, which 
was previously included in "Changes in long-term assets and liabilities." 
2.4.2 IFRS 7, Financial Instruments: Disclosures ("IFRS 7") 
The IASB first amended IFRS 7 on October7, 2010, to require additional 
disclosures regarding transfers of financial assets. These amendments are 
effective for annual periods beginning on or after July1, 2011. The Company 
has adopted these amendments beginning January29, 2012. These amendments do 
not impact the Company's disclosures for the 13 and 39-week periods ended 
October27, 2012. 
3. Issued standards not yet adopted 
The Company monitors the standard setting process for new standards issued by 
the IASB that the Company may be required to adopt in the future. Since the 
impact of a proposed standard may change during the review period, the Company 
does not comment publicly until the standard has been finalized and the 
effects have been determined. 
On June28, 2012, the IASB issued amendments to IFRS 10, Consolidated 
Financial Statements, IFRS 11, Joint Arrangements and IFRS 12, Disclosure of 
Interests in Other Entities: Transition Guidance. The amendments clarify the 
transition guidance in IFRS 10 and also provide additional transition relief 
in IFRS 10, 11 and 12, limiting the requirement to provide adjusted 
comparative information to only the preceding comparative period. These 
amendments are effective for annual periods beginning on or after January1, 
2013, which is aligned with the effective date of IFRS 10, 11 and 12. 
On December16, 2011, the IASB issued amendments to three previously released 
standards. They are as follows: 


      IAS 32, Financial Instruments: Presentation ("IAS 32")
       
      The IASB amended IAS 32 to address inconsistencies in current
      practice in the application of offsetting criteria. The
      amendments provide clarification with respect to the meaning of
      'currently has a legally enforceable right of set-off' and that
      some gross settlement systems may be considered equivalent to net
      settlement. These amendments are effective for annual periods
      beginning on or after January 1, 2014. The Company is currently
      assessing the impact of these amendments on the Company's
      consolidated financial statements and related note disclosures.
       
      IFRS 7, Financial Instruments: Disclosures
       
      On December 16, 2011, the IASB approved additional amendments to
      IFRS 7, which establishes disclosure requirements to help users
      better assess the effect or potential effect of offsetting
      arrangements on a company's financial position. These amendments
      are effective for annual periods beginning on or after January 1,
      2013. The Company will apply these amendments beginning the first
      quarter of its 2013 fiscal year and is currently assessing the
      impact on the Company's disclosures.
       
      IFRS 9, Financial Instruments ("IFRS 9")
       
      The IASB issued IFRS 9 on November 12, 2009, which will
      ultimately replace IAS 39, Financial Instruments: Recognition and
      Measurement ("IAS 39"). The replacement of IAS 39 is a
      three-phase project with the objective of improving and
      simplifying the reporting for financial instruments.
       
      The first phase of the project provides guidance on the
      classification and measurement of financial assets. IFRS 9 was
      subsequently reissued on October 28, 2010, incorporating new
      requirements on accounting for financial liabilities. On
      December 16, 2011, the IASB amended the mandatory effective date
      of IFRS 9 to fiscal years beginning on or after January 1, 2015.
      The amendment also provides relief from the requirement to recast
      comparative financial statements for the effect of applying IFRS
      9. The Company is monitoring the impact of amendments to this
      standard and initial application of this IFRS is expected to
      impact the classification of a number of financial assets which
      will require disclosure in the financial statement notes.

On June16, 2011, the IASB amended IAS 1 to require additional disclosures 
for items presented in OCI on a before-tax basis and requires items to be 
grouped and presented in OCI based on whether they are potentially 
reclassifiable to earnings or loss subsequently (i.e. items that may be 
reclassified and those that will not be reclassified to earnings or loss). 
These amendments are effective for annual periods beginning on or after 
July1, 2012 and require full retrospective application. The Company will 
apply these amendments beginning the first quarter of its 2013 fiscal year and 
is currently assessing the impact to its consolidated financial statements.

On May12, 2011, the IASB issued four new standards, all of which are 
applicable to Annual Reporting periods beginning on or after January1, 2013. 
The Company is currently assessing the impact of these standards on its 
consolidated financial statements and related note disclosures. The following 
is a list and description of these standards:
      IFRS 10, Consolidated Financial Statements ("IFRS 10")
       
      IFRS 10 establishes the standards for the presentation and
      preparation of consolidated financial statements when an entity
      controls one or more entities;
       
      IFRS 11, Joint Arrangements ("IFRS 11")
       
      IFRS 11 replaces IAS 31, Interests in Joint Ventures ("IAS 31")
      and requires that a party in a joint arrangement assess its
      rights and obligations to determine the type of joint arrangement
      and account for those rights and obligations accordingly;
       
      IFRS 12, Disclosure of Involvement with Other Entities ("IFRS
      12")
       
      IFRS 12, along with IFRS 11 described above, replaces IAS 31.
      IFRS 12 requires the disclosure of information that enables users
      of financial statements to evaluate the nature of and the risks
      associated with, the entity's interests in joint ventures and the
      impact of those interests on its financial position, financial
      performance and cash flow; and
       
      IFRS 13, Fair Value Measurement ("IFRS 13")
       
      IFRS 13 provides guidance to improve consistency and
      comparability in fair value measurements and related disclosures
      through a 'fair value hierarchy'. This standard applies when
      another IFRS requires or permits fair value measurements or
      disclosures. IFRS 13 does not apply for share-based payment
      transactions, leasing transactions and measurements that are
      similar to, but are not fair value.

4. Critical accounting judgments and key sources of estimation uncertainty

In the application of the Company's accounting policies, management is 
required to make judgments, estimates and assumptions about the carrying 
amounts of assets and liabilities that are not readily apparent from other 
sources. The estimates and underlying assumptions are based on historical 
experience and other factors that are considered to be relevant. Actual 
results may differ from these estimates. The estimates and underlying 
assumptions are reviewed on an ongoing basis. Revisions to accounting 
estimates are recognized in the period in which the estimate is revised, if 
the revision affects only that period, or in the period of the revision and 
future periods, if the revision affects both current and future periods.

Critical judgments that management has made in the process of applying the 
Company's accounting policies, key assumptions concerning the future and other 
key sources of estimation uncertainty that have the potential to materially 
impact the carrying amounts of assets and liabilities within the next 
financial year are described in Note 4 of the recast 2011 Annual Consolidated 
Financial Statements. The critical accounting judgments and key sources of 
estimation uncertainty used in the preparation of these Financial Statements 
are consistent with those as described in Note 4 of the recast 2011 Annual 
Consolidated Financial Statements.

5. Cash and cash equivalents

Cash and cash equivalents

The components of cash and cash equivalents were as follows:
                          As at           As at    


                October 27,     January 28,                As at
(in CAD millions)          2012            2012     October 29, 2011 
Cash              $        56.7   $        49.0   $               74.0 
Cash equivalents                                                     
Government                                       
  treasury bills          119.9           199.9              — 
Bank term                                        
  deposits                 19.0           121.0                 78.0 
Investment                                       
  accounts                 20.4            20.3                 20.2 
Restricted cash                                    
and cash
equivalents                10.8             7.2                  7.9 
Total cash and    $               $               $
cash equivalents          226.8           397.4                  180.1 
The components of restricted cash and cash equivalents are further discussed 
in Note 15. 
6. Inventories 
The amount of inventories recognized as an expense during the 13 and 39-week 
periods ended October27, 2012 was $605.1 million (2011: $669.4 million) and 
$1,747.9 million (2011: $1,897.2 million), respectively, including $24.9 
million (2011: $52.3 million) and $67.3 million (2011: $99.0 million) related 
to write-downs. Included in inventory write-downs for the 13 and 39-week 
periods ended October 29, 2011 were $38.4 million of additional reserves 
related primarily to the liquidation of excess inventory. These expenses are 
included in "Cost of goods and services sold" in the unaudited Condensed 
Consolidated Statements of Net (Loss) Earnings and Comprehensive (Loss) 
Income. There were no reversals of prior period inventory write-downs during 
the 13 and 39-week periods ended October27, 2012 (2011: Nil). 
Inventory is pledged as collateral under the Company's revolving credit 
facility. 
7. Long-term obligations 
Long-term obligations 
Total outstanding long-term obligations were as follows: 
                    As at                                     As at
(in CAD            October 27,                  As at       October 29,
millions)                 2012       January 28, 2012              2011 
Finance lease                                            
obligations -
Current          $         5.3     $              5.1     $         5.4 
Total                                                    
principal
payments on
long-term
obligations
due within one
year             $         5.3     $              5.1     $         5.4 
Secured                                                  
revolving
credit
facility, net    $     —     $             93.1     $     — 
Finance lease                                            
obligations -
Non-current               32.1                   24.5              25.6 
Total                                                    
long-term
obligations      $        32.1     $            117.6     $        25.6 
The Company's debt consists of a secured credit facility and finance lease 
obligations. In September 2010, the Company entered into an $800.0 million 
senior secured revolving credit facility (the "Credit Facility") with a 
syndicate of lenders with a maturity date of September10, 2015. The Credit 
Facility is secured with a first lien on inventory and credit card 
receivables. Availability under the Credit Facility is determined pursuant to 
a borrowing base formula. Availability under the Credit Facility was $732.5 
million as at October27, 2012 (January 28, 2012: $415.1 million, 
October29, 2011: $793.7 million). The current availability may be reduced by 
reserves currently estimated by the Company to be $300.0 million, which may be 
applied by the lenders at their discretion pursuant to the Credit Facility 
agreement. The availability reserves are the result of judicial developments 
relating to the priorities of pension liability relative to certain secured 
obligations and ensuing negotiations with the Company's lenders. These 
judicial developments are currently under review by the Supreme Court of 
Canada. Subsequent to October 27, 2012, the Company signed an amendment to its 
Credit Facility agreement which would provide additional security to the 
lenders, with respect to the Company's unfunded pension liability by pledging 
certain real estate assets in an amount up to $300.0 million as collateral, 
thereby partially reducing the potential reserve amounts the lenders could 
apply. The potential additional reserve amount may increase or decrease in the 
future based on estimated net pension liabilities and the outcome of the 
matter currently under review by the Supreme Court of Canada. 
The Credit Facility contains covenants which are customary for facilities of 
this nature and the Company was in compliance with all covenants as at 
October27, 2012. 
As at October27, 2012, the Company had no borrowings on the Credit Facility 
and had unamortized transaction costs incurred to establish the Credit 
Facility of $6.7 million included in "Other long-term assets" in the unaudited 
Condensed Consolidated Statements of Financial Position (January28, 2012: 
borrowings of $93.1 million, net of unamortized transaction costs of $8.0 
million, included in "Long-term obligations", October29, 2011: no borrowings 
and unamortized transaction costs of $8.6 million, included in "Other 
long-term assets"). In addition, the Company had $15.1 million (January28, 
2012: $6.3 million, October29, 2011: $6.3 million) of standby letters of 
credit outstanding against the Credit Facility. Interest on drawings under the 
Credit Facility is determined based on bankers' acceptance rates for one to 
three month terms or the prime rate plus a spread. Interest amounts on the 
Credit Facility are due monthly and are added to principal amounts outstanding. 
As at October27, 2012, the Company had outstanding merchandise letters of 
credit of U.S. $9.8 million (January28, 2012: U.S. $5.5 million, 
October29, 2011: U.S. $5.3 million) used to support the Company's offshore 
merchandise purchasing program with restricted cash and cash equivalents 
pledged as collateral. 
8. Capital stock 
On May18, 2010, the Company filed a Normal Course Issuer Bid with the 
Toronto Stock Exchange ("TSX") that permitted the Company to purchase for 
cancellation up to 5% of its issued and outstanding common shares ("2010 
NCIB"). Under the 2010 NCIB, purchases were allowed to commence on May25, 
2010 and terminated on May24, 2011. On May24, 2011, the Company renewed 
the Normal Course Issuer Bid with the TSX for the period of May25, 2011 to 
May24, 2012 ("2011 NCIB"). Pursuant to the 2011 NCIB, the Company was 
permitted to purchase for cancellation up to 5% of its issued and outstanding 
common shares, equivalent to 5,268,599 common shares based on the common 
shares issued and outstanding as at May9, 2011. The Company did not renew 
its 2011 NCIB subsequent to May24, 2012. 
During the 13 and 39-week periods ended October27, 2012, nil and 870,633 
shares (2011: 186,400 and 1,776,200 shares) were purchased for nil and $9.7 
million (2011: $2.6 million and $31.2 million), respectively, and were 
cancelled under the 2011 NCIB and 2010 NCIB. In addition, during Q3 2011, the 
Company settled a $7.5 million share repurchase transaction, accrued and 
outstanding as at the end of Q2 2011. The impact of the share repurchases for 
the 13 and 39-week periods ended October27, 2012 was a decrease to "Capital 
stock" of nil and $0.1 million (2011: $0.1 million and $0.3 million), 
respectively, and a decrease to "Retained earnings" of nil and $9.6 million 
(2011: $2.5 million and $30.9 million), respectively. As at October27, 2012, 
a total of 5,743,933 shares had been purchased for $94.9 million and cancelled 
under the 2011 NCIB and 2010 NCIB resulting in a total decrease to date of 
$0.8 million in "Capital stock" and $94.1 million in "Retained earnings." 
On May17, 2012, the Company announced Sears Holdings' plans to pursue a 
distribution, on a pro rata basis to its shareholders, of a portion of its 
holdings in the Company such that, immediately following the distribution, 
Sears Holdings would retain approximately 51% of the issued and outstanding 
shares of Sears Canada. The Company expects that the proposed distribution by 
Sears Holdings would, if completed, be anticipated to increase the public 
float and potentially the liquidity of the Company's shares. In connection 
with the distribution, the Company has filed documents with the SEC. Refer to 
Note 21 for further details. 
As at October27, 2012, 101,877,662 common shares (January28, 2012: 
102,748,295,October29, 2011: 103,640,895) were issued and outstanding. 
Sears Holdings, the controlling shareholder of the Company, is the beneficial 
holder of 97,341,670, or 95.5%, of the common shares of the Company as at 
October27, 2012 (January28, 2012: 97,341,670, or 94.7%,October29, 
2011: 97,341,670, or 93.9%). The issued and outstanding shares are fully paid 
and have no par value. 
9. Revenue 
The components of the Company's revenue were as follows: 


                13-Week         13-Week       39-Week         39-Week
                  Period         Period         Period         Period


              Ended           Ended         Ended           Ended
(in CAD          October        October        October        October
millions)       27, 2012       29, 2011       27, 2012       29, 2011 
Apparel and   $    339.8     $    375.4     $    959.8     $  1,083.1
Accessories 
Home and           258.8          299.2          779.1          899.4
Hardlines 
Major              224.8          218.7          639.6          632.6
Appliances 
Other              101.7           95.4          283.6          273.9
Merchandise
Revenue 
Services            78.3           88.7          240.6          258.9
and Other 
Commission          27.7           28.5           80.3           83.8
Revenue 
Licensee             6.4            7.3           19.7           21.7
Revenue 
Total         $  1,037.5     $  1,113.2     $  3,002.7     $  3,253.4
Revenue 
10. Retirement benefit plans 
In July 2008, the Company amended its defined benefit plan by introducing a 
defined contribution component and closing the defined benefit component to 
new participants. As such, the defined benefit plan continues to accrue 
benefits related to future compensation increases but no further service 
credit is earned, and no contributions are made by employees. 
The expense for the defined benefit, defined contribution and other benefit 
plans for the 13-week period ended October27, 2012 was $2.5 million (2011: 
$1.6 million), $2.5 million (2011: $2.7 million) and $3.0 million (2011: $3.0 
million), respectively. The expense for the defined benefit, defined 
contribution and other benefit plans for the 39-week period ended October27, 
2012 was $7.5 million (2011: $5.5 million), $7.2 million (2011: $8.0 million) 
and $9.1 million (2011: $9.2 million), respectively. Not included in total 
retirement benefit plans expense for the 13 and 39-week periods are short-term 
disability payments of $1.6 million and $5.9 million (2011: $1.7 million and 
$6.0 million), respectively, that were paid from the other benefit plan. These 
expenses are included in "Selling, administrative and other expenses" in the 
unaudited Condensed Consolidated Statements of Net (Loss) Earnings and 
Comprehensive (Loss) Income. 
Total payments relating to cash contributed by the Company to its defined 
benefit, defined contribution and other benefit plans for the 13 and 39-week 
periods ended October27, 2012 were $11.1 million (2011: $8.0 million) and 
$31.1 million (2011: $15.0 million), respectively. 
The Company is in the process of making a voluntary offer to eligible members 
to buyout the Company's future obligation of the members' retiree health and 
dental benefits. The Company expects accepted offers will be settled in Q4 
2012. 
11. Depreciation and amortization expense 
The components of the Company's depreciation and amortization expense, 
included in "Selling, administrative and other expenses", were as follows: 


                 13-Week         13-Week       39-Week         39-Week
                   Period         Period         Period         Period


               Ended           Ended         Ended           Ended
(in CAD           October        October        October        October
millions)        27, 2012       29, 2011       27, 2012       29, 2011 
Property,                                                  
plant and
equipment      $     25.7     $     26.3     $     78.0     $     80.2 
Intangible                                                 
assets                2.5            2.0            7.2            5.9 
Total                                                      
depreciation
and
amortization
expense        $     28.2     $     28.3     $     85.2     $     86.1 
12. Gain on lease terminations 
On March2, 2012, the Company entered into an agreement to surrender and 
terminate early the operating leases on three properties: Vancouver Pacific 
Centre, Chinook Centre (Calgary) and Rideau Centre (Ottawa). The Company was a 
long-term and important anchor tenant in the three properties, and the 
landlord approached the Company with a proposal to terminate early the three 
leases and vacate the premises in exchange for $170.0 million. The payment 
represents the amount the landlord was willing to pay for the right to 
redevelop the property based upon their analysis of the potential returns from 
redevelopment. 
On the closing date, April20, 2012, the Company received cash proceeds of 
$170.0 million for the surrender of the three leases, resulting in a pre-tax 
gain of $164.3 million for the 13-week period ended April28, 2012, net of 
the de-recognition of leasehold improvements of $5.7 million. The Company 
exited all three properties on October31, 2012, and has no further financial 
obligation related to the transaction. 
On June20, 2012, the Company entered an agreement to surrender and terminate 
early the operating lease on its Deerfoot (Calgary) property. The landlord 
approached the Company with a proposal to terminate early the lease in 
exchange for cash proceeds of $5.0 million, subject to certain closing 
conditions, on the closing date of October26, 2012. In Fiscal 2010, the 
Company incurred an impairment loss of $2.9 million relating to the property, 
plant and equipment at its Deerfoot property. As a result of the agreement and 
expected proceeds, the Company recorded an impairment loss reversal (net of 
accumulated amortization) of $2.1 million in "Selling, administrative and 
other expenses" in Q2 2012. On the closing date of October 26, 2012, the 
Company vacated the property and received cash proceeds of $5.0 million, 
resulting in a pre-tax gain of $2.8 million for the 13-week period ended 
October 27, 2012, net of the de-recognition of leasehold improvements and 
furniture and fixtures of $2.2 million. The Company has no further financial 
obligation related to the transaction. 
13. Sale of Cantrex Group Inc. ("Cantrex") 
On April24, 2012, the Company entered an agreement to sell the operations of 
its subsidiary, Cantrex, to Nationwide Marketing Group, LLC for $3.5 million, 
equal to the net carrying amount of specified Cantrex assets and liabilities 
to be sold. On April29, 2012, the Company received the proceeds on the sale, 
de-recognized the assets and liabilities sold and recorded a gain on sale of 
nil. 
14. Financial instruments 
In the ordinary course of business, the Company enters into financial 
agreements with banks and other financial institutions to reduce underlying 
risks associated with interest rates and foreign currency. The Company does 
not hold or issue derivative financial instruments for trading or speculative 
purposes. 
Financial instrument risk management 
The Company is exposed to credit, liquidity and market risk as a result of 
holding financial instruments. Market risk consists of foreign exchange and 
interest rate risk. 
Credit risk 
Credit risk refers to the possibility that the Company can suffer financial 
losses due to the failure of the Company's counterparties to meet their 
payment obligations. Exposure to credit risk exists for derivative 
instruments, cash and cash equivalents, accounts receivable and investments 
included in other long-term assets. 
Cash and cash equivalents, accounts receivable, and investments included in 
other long-term assets of $322.2 million as at October27, 2012 (January28, 
2012: $514.9 million, October29, 2011: $316.1 million) expose the Company to 
credit risk should the borrower default on maturity of the cash and cash 
equivalents, accounts receivable or investment. The Company manages its 
exposure to credit risk from cash and cash equivalents and investments 
included in other long-term assets through policies that require borrowers to 
have a minimum credit rating of A, and limiting investments with individual 
borrowers at maximum levels based on credit rating. 
The Company is exposed to minimal credit risk from customers as a result of 
ongoing credit evaluations and review of accounts receivable collectability. 
As at October27, 2012, approximately 18.9% (January28, 2012: 
26.5%,October29, 2011: 48.1%) of the Company's accounts receivable was due 
from one customer who was current on their account (January28, 2012: one 
customer who was current on their account, October29, 2011: two customers 
who were current on their accounts). 
Liquidity risk 
Liquidity risk is the risk that the Company may not have cash available to 
satisfy financial liabilities as they come due. The Company actively maintains 
access to adequate funding sources to ensure it has sufficient available funds 
to meet current and foreseeable financial requirements at a reasonable cost. 
The following table summarizes the carrying amount and the contractual 
maturities of both the interest and principal portion of significant financial 
liabilities as at October27, 2012: 
                                          Contractual Cash Flow Maturities 
                                                              3 years    
(in CAD         Carrying                 Within     1 year to      to 5       Beyond
millions)         Amount      Total      1 year      3 years       years      5 years 
Accounts      $            $                      $             $           $
payable and                            $
accrued
liabilities        635.8       635.8      635.8       —     —     — 
Long-term                                                                    
obligations                                                                  
including
payments
due within
one year(1)         37.4        50.4        7.8          12.1         9.6        20.9 
Operating                                                                    
lease                                                                        
obligations
(2)              —       501.2       95.8         155.2        97.1       153.1 
Royalties                                                                    
(2)              —         2.9        0.8           2.1     —     — 
Retirement                                                                   
benefit                                                                      
plans
obligations
(3)                450.8       132.6       37.4          58.7        36.5     — 
          $            $                      $             $           $ 


                 1,124.0     1,322.9   $  777.6         228.1       143.2       174.0

1   Cash flow maturities related to long-term obligations, including
    payments due within one year, include annual interest on finance
    lease obligations at an average rate of 7.6%. The Company had no
    borrowings on the Credit Facility as at October 27, 2012.

2   Operating lease obligations and royalties are not reported on the
    unaudited Condensed Consolidated Statements of Financial Position.

3   Payments beyond 2013 are subject to a funding valuation to be
    completed as at December 31, 2013. Until that time, the Company is
    obligated to fund in accordance with its most recent valuation,
    completed as at December 31, 2010.

Management believes that cash on hand, future cash flow generated from 
operations and availability of current and future funding will be adequate to 
support these financial liabilities.

Market risk

Market risk exists as a result of the potential for losses caused by changes 
in market factors such as foreign currency exchange rates, interest rates and 
commodity prices.

Foreign exchange risk

The Company may enter into foreign exchange contracts to reduce the foreign 
exchange risk with respect to U.S. dollar denominated assets and liabilities 
and purchases of goods or services.
    --  As at October 27, 2012, there were no option contracts
        outstanding (January 28, 2012: no option contracts outstanding,
        October 29, 2011: notional value of option contracts
        outstanding was U.S. $57.0 million) and therefore, no
        derivative financial assets or liabilities were recognized in
        the unaudited Condensed Consolidated Statements of Financial
        Position (January 28, 2012: Nil, October 29, 2011: $1.1 million
        included in "Derivative financial liabilities"). The intrinsic
        value portion of derivatives is designated as a cash flow hedge
        for hedge accounting treatment under IAS 39. Option contracts
        are intended to reduce the foreign exchange risk with respect
        to anticipated purchases of U.S. dollar denominated goods and
        services, including goods purchased for resale ("hedged item").

While the notional principal of outstanding financial instruments is not 
recorded on the unaudited Condensed Consolidated Statements of Financial 
Position, the fair value of any outstanding contracts is included in 
"Derivative financial assets" or "Derivative financial liabilities", depending 
on the fair value, and classified as current or long-term, depending on the 
maturities of the outstanding contracts. Changes in the fair value of the 
designated portion of contracts are included in OCI for cash flow hedges, to 
the extent the designated portion of the hedges continue to be effective, with 
the ineffective portion included in "Selling, administrative and other 
expenses" in the unaudited Condensed Consolidated Statements of Net (Loss) 
Earnings and Comprehensive (Loss) Income. Amounts previously included in OCI 
are reclassified to "Cost of goods and services sold" in the same period in 
which the hedged item impacts net (loss) earnings.

For the 13 and 39-week periods ended October27, 2012, the Company recorded a 
gain of $0.3 million and a loss of $0.7 million (2011: loss of $1.5 million 
and gain of $1.7 million), respectively, relating to the translation or 
settlement of U.S. dollar denominated monetary items consisting of cash and 
cash equivalents, accounts receivable and accounts payable, excluding the 
reclassification from OCI of the gain (loss) on foreign exchange derivatives 
designated as cash flow hedges.

The period end exchange rate was 1.002 U.S. dollar to Canadian dollar. A 10% 
appreciation or depreciation of the U.S. and/or the Canadian dollar exchange 
rate was determined to have an after tax impact on net (loss) earnings of $5.5 
million for U.S. dollar denominated balances included in cash and cash 
equivalents, accounts receivable and accounts payable.

Interest rate risk

From time to time, the Company enters into interest rate swap contracts with 
approved financial institutions to manage exposure to interest rate risks. As 
at October27, 2012, the Company had no interest rate swap contracts in 
place. Interest rate risk reflects the sensitivity of the Company's financial 
condition to movements in interest rates. Financial assets and liabilities 
which do not bear interest or bear interest at fixed rates are classified as 
non-interest rate sensitive.

Cash and cash equivalents and borrowings under the secured revolving credit 
facility are subject to interest rate risk. The total subject to interest rate 
risk as at October27, 2012 was a net asset of $228.1 million (January28, 
2012: net asset of $297.7 million, October29, 2011: net asset of $181.4 
million). An increase or decrease in interest rates of 0.25% would cause an 
immaterial after-tax impact on quarterly net (loss) earnings.

Classification and fair value of financial instruments

The estimated fair values of financial instruments presented are based on 
relevant market prices and information available at those dates. The following 
table summarizes the classification and fair value of certain financial 
instruments as at the specified dates. The Company determines the 
classification of a financial instrument when it is initially recorded, based 
on the underlying purpose of the instrument. As a significant number of the 
Company's assets and liabilities, including inventories and capital assets, do 
not meet the definition of financial instruments, values in the table below do 
not reflect the fair value of the Company as a whole.

The fair value of financial instruments are classified and measured according 
to the following three levels, based on the fair value hierarchy.
    - Level 1:   Quoted prices in active markets for identical assets
                 or liabilities
                  
    - Level 2:   Inputs other than quoted prices in active markets that
                 are observable for the asset or liability either
                 directly (i.e. as prices) or indirectly (i.e. derived
                 from prices)
                  
    - Level 3:   Inputs for the asset or liability that are not based
                 on observable market data
                                                                                                         


                                                         Fair      As at                              As at
(in CAD                                                     Value     October                           October
millions)                                               Hierarchy         27,                As at          29,
Classification            Balance Sheet Category              (1)        2012     January 28, 2012         2011 
Available for                                                                                          
sale                                                                                                            
Cash                                                                                                 
  equivalents      Cash and cash equivalents              Level 2       140.3                 220.2         20.2 
Fair value                                                                                             
through profit
or loss                                                                                                         
U.S. $                                                                                               
  derivative
  contracts        Derivative financial liabilities       Level 2     —               —          1.1 
Long-term                                                                                            
  investments      Other long-term assets                 Level 3         1.3                   1.3          1.3 
1 Classification of fair values relates to 2012. 
All other assets that are financial instruments not listed in the chart above 
have been classified as "Loans and receivables". All other financial 
instrument liabilities have been classified as "Other liabilities" and are 
measured at amortized cost in the unaudited Condensed Consolidated Statements 
of Financial Position. The carrying value of these financial instruments 
approximates fair value. 
During the 13 and 39-week periods ended October27, 2012, there were no 
transfers of financial instruments between fair value levels nor were there 
any changes in the classification of financial assets. 
15. Contingent liabilities, commitments and guarantees 
Legal proceedings 
The Company is involved in various legal proceedings incidental to the normal 
course of business. The Company takes into account all available information, 
including guidance from experts (such as internal and external legal counsel) 
at the time of reporting to determine if it is probable that a present 
obligation (legal or constructive) exists, if it is probable that an outflow 
of resources embodying economic benefit will be required to settle such 
obligation and whether the Company can reliably measure such obligation at the 
end of the reporting period. The Company is of the view that, although the 
outcome of such legal proceedings cannot be predicted with certainty, the 
final disposition is not expected to have a material adverse effect on the 
Company's unaudited Condensed Consolidated Financial Statements, including its 
unaudited Condensed Consolidated Statements of Financial Position, unaudited 
Condensed Consolidated Statements of Net (Loss) Earnings and Comprehensive 
(Loss) Income, and unaudited Condensed Consolidated Statements of Cash Flows. 
Three class actions in the provinces of Quebec, Saskatchewan and Ontario were 
commenced against the Company in 2005 arising out of the Company's pricing of 
tires. The plaintiffs allege that the Company inflated the regular retail 
price of certain brands of tires sold by the Company in order to then claim 
that the same brands were on sale for up to 45% off the regular retail price 
so as to induce potential customers into believing that substantial savings 
were being offered. The plaintiffs seek general damages, special damages, and 
punitive damages, as well as costs, pre-judgment and post-judgment interest. 
No dollar amounts are specified. The Company believes these claims are without 
merit, and intends to defend against them vigorously. In view of the 
uncertainty regarding the amount of damages, if any, that could be 
established, and in light of the plaintiffs not having stated an amount of 
damages they may seek in this matter, the Company does not believe a material 
outflow of resources embodying economic benefit is likely to result. 
Commitments 
As at October27, 2012, cash and cash equivalents that are restricted 
represent cash and investments pledged as collateral for letter of credit 
obligations issued under the Company's offshore merchandise purchasing program 
of $10.8 million (January 28, 2012: $7.2 million, October29, 2011: $7.2 
million), which is the Canadian equivalent of U.S. $10.8 million (January 28, 
2012: U.S. $7.2 million, October29, 2011: U.S. $7.2 million). As at 
October27, 2012, there were no cash deposits in restricted cash and cash 
equivalents pledged as collateral with counterparties relating to outstanding 
derivative contracts (January 28, 2012: Nil, October29, 2011: $0.7 million). 
Guarantees 
The Company has provided the following significant guarantees to third parties: 
Royalty License Agreements 
The Company pays royalties under various merchandise license agreements, which 
are generally based on the sale of products. Certain license agreements 
require a minimum guaranteed payment of royalties over the term of the 
contract, regardless of sales. Total future minimum royalty payments under 
such agreements as at October27, 2012 are $2.9 million (January 28, 2012: 
$3.1 million, October29, 2011: $3.7 million). 
Other Indemnification Agreements 
In the ordinary course of business, the Company has provided indemnification 
commitments to counterparties in transactions such as leasing transactions, 
royalty agreements, service arrangements, investment banking agreements and 
director and officer indemnification agreements. The Company has also provided 
certain indemnification agreements in connection with the sale of the credit 
and financial services operations in November 2005. The foregoing 
indemnification agreements require the Company to compensate the 
counterparties for costs incurred as a result of changes in laws and 
regulations, or as a result of litigation or statutory claims, or statutory 
sanctions that may be suffered by a counterparty as a consequence of the 
transaction. The terms of these indemnification agreements will vary based on 
the contract and typically do not provide for any limit on the maximum 
potential liability. Historically, the Company has not made any significant 
payments under such indemnifications and no amount has been accrued in the 
unaudited Condensed Consolidated Financial Statements with respect to these 
indemnification commitments. 
16. Net (loss) earnings per share 
A reconciliation of the number of shares used in the net (loss) earnings per 
share calculation is as follows: 


              13-Week        13-Week         39-Week           39-Week
                Period        Period           Period           Period


            Ended          Ended           Ended             Ended
(Number of     October       October      October 27,      October 29,
shares)       27, 2012      29, 2011             2012             2011 
Weighted                                                  
average
number of
shares per
basic and
diluted net
(loss)
earnings
per share
calculation   101,877,662   103,782,480    102,150,564     104,575,299 
"Net (loss) earnings" as disclosed in the unaudited Condensed Consolidated 
Statements of Net (Loss) Earnings and Comprehensive (Loss) Income was used as 
the numerator in calculating the basic and diluted net (loss) earnings per 
share. For both the 13 and 39-weeks ended October27, 2012, 8,560 options 
were excluded from the calculation of diluted net (loss) earnings per share as 
they were anti-dilutive. 
17. Income taxes 
The Company's total net cash refunds or payments of income taxes for the 13 
and 39-week periods ended October27, 2012 was a net payment of $3.5 
million (2011: net refund of $2.7 million) and net refund of $0.7 million, 
respectively (2011: net payment of $37.7 million). The Company's total net 
cash deposits or receipts of tax re-assessments under dispute for both the 13 
and 39-week periods ended October 27, 2012 was a net payment of $15.2 million 
(2011: net payment of $11.7 million). 
In the ordinary course of business, the Company is subject to ongoing audits 
by tax authorities. While the Company believes that its tax filing positions 
are appropriate and supportable, periodically, certain matters are challenged 
by tax authorities. During the 13 and 39-week periods ended October27, 2012, 
the Company recorded charges for interest on prior period tax re-assessments 
and accruals for uncertain tax positions as described in the table below, all 
included in the unaudited Condensed Consolidated Statements of Net (Loss) 
Earnings and Comprehensive (Loss) Income as follows: 


                13-Week          13-Week      39-Week         39-Week
                 Period           Period       Period          Period


              Ended            Ended        Ended           Ended
(in CAD         October          October      October     October 29,
millions)      27, 2012         29, 2011     27, 2012            2011 
Finance      $    (0.1)      $     (0.3)   $    (3.8)   $       (4.9)
costs 
Income tax                                                           
recovery
(expense): 
Current       —          —        (5.5)          (17.9) 
Deferred      —          —          2.3            12.8 
Total        $    (0.1)      $     (0.3)   $    (7.0)   $      (10.0)
charges on
uncertain
tax
positions 
As the Company routinely evaluates and provides for potentially unfavourable 
outcomes with respect to any tax audits, the Company believes that, other than 
as noted above, the final disposition of tax audits will not have a material 
adverse effect on its liquidity. 
Included in "Other long-term assets" in the unaudited Condensed Consolidated 
Statements of Financial Position as at October27, 2012, were receivables of 
$13.0 million (January 28, 2012: $30.3 million, October29, 2011: $30.3 
million) related to payments made by the Company for disputed tax assessments. 
During Q2 2012, tax authorities agreed to settle a dispute with the Company 
and refund the associated deposit. As a result, the Company reclassified $28.2 
million from "Other long-term assets" to "Income taxes recoverable" in the 
unaudited Condensed Consolidated Statements of Financial Position. In 
addition, the Company recognized $1.6 million of interest income relating to 
the deposit to be refunded in "Interest income" in the unaudited Condensed 
Consolidated Statements of Net (Loss) Earnings and Comprehensive (Loss) Income 
in Q2 2012. During the 13-week period ended October 27, 2012, the Company 
received $18.1 million of the anticipated recovery. 
In Q2 2012, the Company received a re-assessment to a previous tax filing 
which the Company is disputing. As a result of the re-assessment, the Company 
expects to place a total of $54.7 million on deposit relating to these 
disputed tax matters while the issues are being resolved. During the 13-week 
period ended October 27, 2012, the Company placed $33.3 million on deposit 
relating to this matter, of which $10.9 million has been included in "Other 
long-term assets" and $22.4 million has been included in "Income taxes 
recoverable" in the unaudited Condensed Consolidated Statements of Financial 
Position as at October 27, 2012. 
18. Operating segments 
In order to identify the Company's reportable segments, the Company uses the 
process outlined in IFRS 8, which includes the identification of the Chief 
Operating Decision Maker, the identification of operating segments, which has 
been done based on Company formats, and the aggregation of operating segments. 
The Company has aggregated its operating segments into one reportable segment, 
which derives its revenue from the sale of merchandise and related services to 
customers. 
19. Changes in non-cash working capital balances 
Cash (used for) generated from non-cash working capital balances were 
comprised of the following: 


                 13-Week      13-Week         39-Week           39-Week
                  Period       Period          Period            Period


               Ended        Ended           Ended             Ended
(in CAD          October      October     October 27,       October 29,
millions)       27, 2012     29, 2011            2012              2011 
Accounts                                               
receivable    $    (5.1)   $    (4.2)   $        18.6     $         9.3 
Inventories      (159.0)       (81.5)         (182.3)            (41.8) 
Prepaid                                                
expenses             9.6          8.9           (4.0)             (4.4) 
Accounts                                               
payable and
accrued
liabilities        104.0        127.0            52.7              77.5 
Deferred                                               
revenue          —          0.5          (15.4)            (16.7) 
Provisions           4.0          5.1           (8.6)               3.2 
Income and                                             
other taxes
payable and
recoverable       (21.4)       (13.2)          (51.4)            (37.9) 
Derivative                                             
financial
assets and
liabilities      —          6.7         —             (0.1) 
Cash (used                                             
for)
generated
from
non-cash
working
capital
balances      $   (67.9)   $     49.3   $     (190.4)     $      (10.9) 
20. Changes in long-term assets and liabilities 
Cash generated from (used for) long-term assets and liabilities were comprised 
of the following: 


                 13-Week      13-Week         39-Week         39-Week
                  Period       Period          Period          Period


               Ended        Ended           Ended           Ended
(in CAD          October      October     October 27,     October 29,
millions)       27, 2012     29, 2011            2012             201 
Other                                                  
long-term
assets        $    (0.9)   $     24.4   $        23.1   $        11.5 
Other                                                  
long-term
liabilities        (2.5)       (10.6)           (1.8)           (6.9) 
Other                0.2        (9.6)             6.9           (2.2) 
Cash (used                                             
for)
generated
from
long-term
assets and
liabilities   $    (3.2)   $      4.2   $        28.2   $         2.4 
21. Subsequent Events 
In connection with the Company's announcement of Sears Holdings' plans to 
distribute its holdings of Sears Canada described in Note 8, the distribution 
is scheduled to be made on November 13, 2012 to Sears Holdings' stockholders 
of record as of the close of business on November 1, 2012 , the record date 
for the distribution. Every share of Sears Holdings common stock held as of 
the close of business on the record date will entitle the holder to a 
distribution of 0.4283 Sears Canada common shares. In connection with the 
announced distribution, the Company has filed documents with the SEC. 
22. Approval of unaudited condensed consolidated financial statements 
The unaudited Condensed Consolidated Financial Statements were approved by the 
Board of Directors and authorized for issue on November12, 2012. 
Contact for Media: 
Vincent Power Sears Canada, Corporate Communications 416-941-4422 
vpower@sears.ca 
SOURCE: Sears Canada Inc. 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/November2012/13/c7274.html 
CO: Sears Canada Inc.
ST: Ontario
NI: RET ERN  
-0- Nov/13/2012 12:00 GMT