Sears Canada Inc revenue decline decelerated to 8.1% in FY2016 vs. 14.2% a year earliner
18.03.2016 • About Sears Canada Inc (
$SCC) • By InTwits
Sears Canada Inc reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Sears Canada Inc is a company in decline: FY2016 revenue growth was -8.1%, 5 years revenue CAGR was -8.6%
- The company operates at negative EBITDA Margin: -7.9%
- Sears Canada Inc spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2012-FY2016 is 0.0%. Average EBITDA Margin for the same period was -2.8%0
- Sears Canada Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.8%. At the same time it's in pair with industry average of 4.9%.
- CAPEX is quite volatile: 925 in 2016, 906 in 2015, 741 in 2014, 715 in 2013, 269 in 2012
- The company has unprofitable business model: ROIC is at -50.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Sears Canada Inc ($SCC) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 4,619 | 4,301 | 3,992 | 3,425 | 3,146 | -8.1% |
| Gross Profit | 1,687 | 1,552 | 1,444 | 1,116 | 1,000 | -10.5% |
| SG&A | 1,738 | 1,634 | 1,632 | 1,524 | 1,298 | -14.8% |
| EBITDA | 64 | 30 | -76 | -318 | -250 | |
| Net Income | -50 | 101 | 447 | -339 | -68 | |
Balance Sheet
|
|---|
| Cash | 397 | 237 | 514 | 259 | 314 | 21.2% |
| Short Term Debt | 5 | 5 | 8 | 4 | 4 | 0.0% |
| Long Term Debt | 118 | 31 | 28 | 24 | 20 | -16.2% |
Cash flow
|
|---|
| Capex | 84 | 98 | 71 | 54 | 45 | -15.9% |
Ratios
|
|---|
| Revenue growth | -6.5% | -6.9% | -7.2% | -14.2% | -8.1% | |
| EBITDA growth | -79.1% | -52.5% | -351.3% | 316.2% | -21.4% | |
| Gross Margin | 36.5% | 36.1% | 36.2% | 32.6% | 31.8% | -0.8% |
| EBITDA Margin | 1.4% | 0.7% | -1.9% | -9.3% | -7.9% | 1.3% |
| Net Income Margin | -1.1% | 2.4% | 11.2% | -9.9% | -2.2% | 7.7% |
| SG&A, % of revenue | 37.6% | 38.0% | 40.9% | 44.5% | 41.3% | -3.2% |
| CAPEX, % of revenue | 1.8% | 2.3% | 1.8% | 1.6% | 1.4% | -0.1% |
| ROIC | -3.4% | -7.6% | -17.8% | -48.5% | -50.5% | -2.0% |
| ROE | -3.8% | 9.3% | 41.5% | -41.2% | -12.1% | 29.1% |
| Net Debt/EBITDA | -4.3x | -6.6x | | | | 0.0x |
Sears Canada Inc ($SCC) key quoterly financial indicators
| mln. CAD | FY16Q1 | FY16Q2 | FY16Q3 | FY16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 697 | 769 | 792 | 888 | -9.7% | -9.1% | -5.1% | -8.7% |
| EBITDA | -51 | -34 | -39 | -127 | | | | |
| Net Income | -59 | 14 | -53 | 31 | | | | |
Balance Sheet
|
|---|
| Cash | 116 | 209 | 75 | 314 | -57.3% | -21.6% | -68.2% | 21.2% |
| Short Term Debt | 4 | 4 | 4 | 4 | -17.0% | -9.3% | -4.9% | 0.0% |
| Long Term Debt | 23 | 22 | 21 | 20 | -14.1% | -14.3% | -15.2% | -16.2% |
Ratios
|
|---|
| Gross Margin | 33.6% | 32.8% | 32.6% | 28.7% | 0.8% | -0.5% | -1.7% | -1.7% |
| EBITDA Margin | -7.2% | -4.4% | -4.9% | -14.4% | 2.7% | 0.7% | 3.3% | -0.8% |
| Net Income Margin | -8.5% | 1.8% | -6.7% | 3.5% | 1.3% | 4.3% | 7.5% | 16.2% |
Revenue and profitability
The company's Revenue decreased on 8.1%. Revenue decline showed acceleration in FY16Q4 - it was 8.7% YoY. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased slightly on 1.3 pp from -9.3% to -7.9% in FY2016.
Gross Margin decreased slightly on 0.82 pp from 32.6% to 31.8% in FY2016. SG&A as a % of Revenue decreased on 3.2 pp from 44.5% to 41.3% in FY2016.
Net Income marign increased on 7.7 pp from -9.9% to -2.2% in FY2016.
Capital expenditures (CAPEX) and working capital investments
In FY2016 Sears Canada Inc had CAPEX/Revenue of 1.4%. CAPEX/Revenue decreased slightly on 0.82 pp from 2.3% in FY2013 to 1.4% in FY2016. Average CAPEX/Revenue for the last three years was 1.6%.
Return on investment
The company operates at negative ROIC (-50.47%) and ROE (-12.07%). ROIC decreased slightly on 2.0 pp from -48.5% to -50.5% in FY2016. ROE surged on 29.1 pp from -41.2% to -12.1% in FY2016.
Leverage (Debt)
Debt level is 2.3x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA didn't change in FY2016. Debt dropped on 13.9% while cash surged on 21.2%.
Appendix 1: Peers in Consumer, Cyclical
Below you can find Sears Canada Inc benchmarking vs. other companies in Consumer, Cyclical industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Poydras Gaming Finance Corp ($PYD) | | | | 539.9% | |
| Restaurant Brands International Inc ($QSR) | | | 4.6% | 238.0% | |
| Amaya Inc ($AYA) | 311.5% | 85.2% | 254.0% | 113.8% | |
| NYX Gaming Group Ltd ($NYX) | 65.2% | 52.8% | 45.8% | 91.8% | |
| Rainmaker Entertainment Inc ($RNK) | -24.6% | -45.0% | 30.1% | 56.4% | |
| |
|---|
| Median (49 companies) | 5.3% | 4.9% | 7.8% | 8.6% | |
|---|
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| NYX Gaming Group Ltd ($NYX) | 91.3% | 86.7% | 88.3% | 85.6% | |
| DEQ Systems Corp ($DEQ) | 77.5% | 78.4% | 84.7% | 82.7% | |
| Second Cup Ltd/The ($SCU) | 86.6% | 85.1% | 72.7% | 81.1% | |
| New Look Vision Group Inc ($BCI) | 71.8% | 72.6% | 72.6% | 78.7% | |
| Cara Operations Ltd ($CAO) | | 79.2% | 78.9% | 78.4% | |
| |
|---|
| Median (42 companies) | 34.1% | 31.8% | 31.9% | 30.6% | |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Westshore Terminals Investment Corp ($WTE) | 49.7% | 65.9% | 60.9% | 59.6% | |
| Gamehost Inc ($GH) | 46.1% | 45.7% | 45.9% | 42.8% | |
| Great Canadian Gaming Corp ($GC) | 16.8% | 41.1% | 40.1% | 36.6% | |
| Restaurant Brands International Inc ($QSR) | | 51.1% | 20.8% | 33.9% | |
| Cara Operations Ltd ($CAO) | | 9.6% | 22.6% | 32.6% | |
| |
|---|
| Median (46 companies) | 7.5% | 9.7% | 10.2% | 9.0% | |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Holloway Lodging Corp ($HLC) | 8.2% | 6.7% | 14.8% | 26.7% | |
| WestJet Airlines Ltd ($WJA) | 7.9% | 19.5% | 18.6% | 22.5% | |
| Westshore Terminals Investment Corp ($WTE) | 25.7% | 11.5% | 6.2% | 21.2% | |
| Exchange Income Corp ($EIF) | 7.9% | 15.8% | 15.5% | 15.4% | |
| Chorus Aviation Inc ($CHR.A) | 9.9% | 9.6% | 3.9% | 15.0% | |
| |
|---|
| Median (49 companies) | 2.7% | 3.1% | 3.4% | 2.8% | |
|---|
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Partner Jet Corp ($PJT) | -51.6% | -50.8% | 85.1% | 51.1% | |
| Westshore Terminals Investment Corp ($WTE) | 24.0% | 37.8% | 35.0% | 38.3% | |
| Cara Operations Ltd ($CAO) | | | 24.7% | 35.1% | |
| Air Canada ($AC) | | 37.0% | 23.2% | 28.4% | |
| BMTC Group Inc ($GBT) | 33.0% | 32.5% | 25.2% | 25.2% | |
| |
|---|
| Median (49 companies) | 9.2% | 9.7% | 9.9% | 7.7% | |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Poydras Gaming Finance Corp ($PYD) | | | | 39.7x | |
| Mountain China Resorts Holding Ltd ($MCG) | | | 317.1x | 29.0x | |
| Rainmaker Entertainment Inc ($RNK) | | | | 18.6x | |
| Holloway Lodging Corp ($HLC) | | 5.8x | 8.4x | 17.1x | |
| AutoCanada Inc ($ACQ) | 4.2x | 4.7x | 6.4x | 8.0x | |
| |
|---|
| Median (38 companies) | 1.6x | 2.0x | 2.4x | 2.7x | |
|---|
