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____ Monday December 7, 2015 ____


Retail - Traditional

Sears Canada Reports Third Quarter Results

Toronto - Sears Canada Inc. announced operational highlights and financial results for the third quarter of Fiscal 2015.

Third Quarter 2015 Operational Highlights

• Company-wide same store sales for the quarter increased over the prior year's same period, primarily due to the performance of major appliances, furniture and mattresses.

• In the core retail store network1, same store sales were also positive, continuing to show the stability that began in the second quarter.

• Completed installation of 140 vendor-branded shop-in-shops with 11 key vendor-partners.

• Through the end of the third quarter, implemented approximately $67 million in annualized cost savings as compared to full year 2014 operating cost levels as part of previously announced initiatives to generate annualized benefits of $100 - $125 million as compared to full year 2014 operating cost levels.

• Adjusting for the impact of the weakening Canadian dollar/U.S. dollar exchange rate, gross margin rate and Adjusted EBITDA improved as compared to the same quarter last year.

• Announced agreements2 to monetize approximately $108.5 million of real estate assets.

• Appointed Carrie Kirkman to the position of President and Chief Merchant.
The core retail store network consists of Sears Canada's 95 full-line stores and 43 Sears Home stores, and excludes the Outlet and Hometown stores.
This amount does not include the $28 million announced in the second quarter. Real estate transactions are subject to certain closing conditions.

Third Quarter 2015 Financial Highlights

• Revenue. Revenue was $792.1 million, a decline of 5.1% compared to the same quarter last year.
Same Store Sales. Same store sales across all channels increased by 0.4% compared to the same quarter last year. The difference between the decline in revenue and the increase in same store sales was primarily due to store exits since last year and declines in the Company's Direct business.

• Core Retail Same Store Sales. Same store sales for the Company's core retail store network were up 2.7% for the third quarter compared to the same quarter last year, and were positive for each month within the quarter, and across both the Apparel & Accessories category and the Home & Hardlines category.

• Gross Margin. The gross margin rate was 32.6% in the third quarter, as compared to 34.3% for the same quarter last year. Excluding the negative impact of a weaker Canadian dollar, the gross margin rate would have improved by 90 bps to 35.2% as compared to 34.3% for the same quarter last year. The Company will continue to maintain the foreign exchange hedging programs and operating processes it began in the second quarter, as appropriate, to manage the impact of future volatility in the exchange rate. These programs and processes are expected to continue to partially mitigate foreign exchange risk for the balance of 2015 and into 2016.

• Adjusted EBITDA. Adjusted EBITDA was a loss of $31.7 million compared to a loss of $19.4 million for the same quarter last year. Adjusted EBITDA was negatively impacted by $18.6 million due to the weakening of the Canadian dollar compared to the U.S. dollar. In addition, the Company invested $6.1 million in preparation for the launch of its new loyalty program which came into effect on November 16, 2015. Excluding these impacts, Adjusted EBITDA would have been a loss of $7.0 million for the third quarter this year compared to a loss of $19.4 million for the same quarter last year. Adjusted EBITDA is a non-IFRS measure.

• Net Loss. The net loss for the third quarter this year was $53.2 million or 52 cents per share compared to a net loss of $118.7 million or $1.16 per share for the same quarter last year. For a list of non-recurring charges for this year and last year, please refer to the "Reconciliation of Net Loss to Adjusted EBITDA" table included in this release.

• Cash Position. Sears Canada ended the quarter with $75 million in cash, and expects to receive proceeds of approximately $211 million in the fourth quarter ($174 million of which has already been received at the time of this news release), primarily from the termination of the credit card agreement with JPMorgan Chase Bank, N.A. ("JPMorgan Chase") and previously announced real estate transactions that are scheduled to close in the fourth quarter. The JPMorgan Chase transaction is discussed in more detail below in this release. These proceeds, along with the $100 million of proceeds from the previously announced sale and leaseback of the Company's national logistics centre located in Vaughan, Ontario that is expected to close in the first quarter of 2016, would give the Company a pro forma cash balance of $386 million. Sears Canada had no cash borrowings on the Company's $300 million credit facility as at the end of the third quarter.

Business Initiative Highlights

"The positive momentum that began in the second quarter has continued throughout the third quarter and we are pleased with the progress being made across the enterprise," said Brandon G. Stranzl, Executive Chairman, Sears Canada Inc. "The focus on our three key business initiatives, the progress of which is described below, is serving to bring discipline to our approach of providing Canadians with an outstanding retail experience, establishing a sense of pride in our associates and creating value for our shareholders."

Following are highlights of the progress made within each of the Company's three key Business Initiatives:

Increase Revenue. The Company announced on September 2, 2015 the establishment of agreements with 12 vendors to install vendor-branded shop-in-shops throughout the store, and since that time five more brands have signed on. As of the end of the third quarter, 140 shop-in-shops had been installed from national brands as well as 25 shop-in-shops from Sears Canada's own No. 99 Wayne Gretzky Collection. Each national brand assisted with elements of the assortment planning, replenishment, and pricing, and invested in fixtures, marketing, and other efforts that have refreshed and improved the shopping experience in stores.

"Stores with these installations are performing well and we will continue to explore similar opportunities to refresh the customer experience as we move through 2016," commented Mr. Stranzl. "The installations completed so far represent significant progress as Sears Canada seeks to grow revenue by revitalizing our stores as a destination for Canadian shoppers. Approximately 50 shop-in-shops are scheduled to be installed for the fourth quarter and approximately 20 are scheduled to be installed during the first quarter of 2016."

The Company launched the No. 99 Wayne Gretzky collection in September, and it has been very popular with customers thus far. The new Spring 2016 line debuted at Fashion Week in Toronto to a very enthusiastic audience, which included Wayne Gretzky himself, and won the Fashion Magazine award for Best Styling. Also during the third quarter, women's apparel brands Robert Rodriguez and Jessica Simpson launched and the Company announced a new relationship with world-renowned designer, Debbie Travis, whose home décor and accessories line will be in stores next year.

In the coming year, a refreshed e-commerce platform will also be a key focus to drive revenue growth.

Operate Profitably. The cost structure of Sears Canada over the past several years has not kept pace with the size of the business. The implementation of a cost reduction program that is designed to reduce recurring operating expenses by $100 million to $125 million on an annualized basis versus 2014 levels was initiated earlier this year.

"Our cost reduction program is underway and, as of the end of the third quarter, $67 million in annualized savings have been implemented versus 2014 levels," said Mr. Stranzl. "An additional $30 million to $40 million in annualized cost savings is planned for the fourth quarter of 2015." The estimated one-time cost of implementation for the entire cost reduction program is $15 million to $20 million.

Sears Canada continues to study its business configuration and expects to implement further improvements to the cost structure in 2016.

Maintain a Strong Balance Sheet. The Company believes that maintaining a strong balance sheet with surplus liquidity will demonstrate that Sears Canada can compete and win the business of Canadian shoppers. In addition, a strong balance sheet signals stability and longevity and instills confidence in the Company's business partners and other stakeholders.

Sears Canada continues to have substantial non-core assets and will seek opportunities for the Company to be more efficient with its asset base. The Company will evaluate opportunities to create value with this asset base, all within the context of revitalizing Sears Canada's core full-line retail business and maintaining a strong balance sheet.

On November 13, 2015, the Company announced the sale-leaseback of its Vaughan, Ontario national logistics centre for $100 million. This transaction is expected to close in the first quarter of 2016. The leaseback arrangement will make the transition seamless both from a customer service and an associate continuity perspective.

Sears Canada has also agreed to sell a distribution centre which it had previously exited for $8.5 million and, as previously announced on September 2, 2015, agreed to the sale of another distribution centre for $18.1 million, and the sale and leaseback of a non-mall based property for $10.0 million which the Company will continue to operate post-sale. These three transactions are expected to close in the fourth quarter of 2015.

During the third quarter, the Company also formalized an agreement with Concord Pacific Real Estate Developments Ltd. to pursue the development of certain lands.

The Company believes that its core retail full-line store channel has enormous value as a retail distribution network to reach Canadian consumers and this store channel is the primary focus of the Company's business initiatives to increase sales. The Company will continue to evaluate its footprint and business channels and will make adjustments where necessary to support its marketplace position as a destination for Main Street Canadian consumers and to achieve acceptable levels of profitability.

"All opportunities will be evaluated to optimize the Company's retail and logistics footprint," commented Mr. Stranzl. "These opportunities may include rationalization of the store and channel footprint, as well as required distribution centre space, subleasing or subdividing stores, and adding more shop-in-shop concepts."

Further strengthening the balance sheet is the receipt of $174 million during the fourth quarter in respect of the termination of the credit card agreement between Sears Canada and JPMorgan Chase on November 15, 2015. The termination of this agreement will create a hurdle for operating results during 2016, but the Company is focused on mitigating this impact and on setting up alternative financing solutions for customers.

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