discontinue operations of the Up Fashion division. This represents a strategic shift in operations that has a major impact on the Company's operations and financial results and has been accounted for as discontinued operations This strategy will allow the Company to focus its efforts on improving Little Miss Division sales and profitability, expanding internationally, and continuing to develop its miss tween business. The Company closed 17 Up Fashion stores in the first fiscal quarter of 20X1 and during the second fiscal quarter of 20X1, closed the remaining 18 Up Fashion stores. The results of the Up Fashion stores closed to date, net of income tax benefit, which consists of 35 and 49 stores for the fiscal years ended July 2, 20X1 and July 3, 20X0, respectively, have been presented as a discontinued operation in the accompanying consolidated statements of operations and comprehensive income (loss) for all periods presented and are as follows:
| Fiscal Year Ended | |
| July 2, 20X1 | |
| Net sales | $10,205 |
| Cost of sales, including production and occupancy | 17,378 |
| Gross margin | (7,173) |
| Selling, general and administrative expenses | 5,351 |
| Loss from discontinued operations, before income tax benefit | (12,524) |
| Tax benefit | (5,939) |
| Loss from discontinued operations, net of tax benefit | $(6,585) |
Example 2.7: Discontinued Operations—Note Disclosure in Years Subsequent to the Year in Which the Discontinued Operation Was Classified as Held for Sale
In the second quarter of 20X2, following termination of the Home Décor agreement, the Company disclosed its intention to explore strategic alternatives regarding its European Home Decor business of the International Division.
On September 23, 20X2, the Company announced that it had received an irrevocable offer from Davis Investors, a subsidiary of The Lawson Group (the “Purchaser”) to acquire the Company's European business operations (the “Home Décor Business”). The transaction was structured as an equity sale with the Purchaser acquiring the Home Décor Business with its operating assets and liabilities.
In addition to approving the sale of the Home Décor Business in the third quarter of 20X2, the Company's Board of Directors approved a plan to sell substantially all of the remaining operations of the International Division. On December 31, 20X2, the Company closed the sale of the Home Décor Business contemplated by the Sale and Purchase Agreement (the SPA) dated November 22, 20X2 as amended to complete the sale). Approximately $70 million has been accrued at December 31, 20X2 under a working capital adjustment provision. The draft working capital adjustment submitted by the Company to the Purchaser is subject to a dispute resolution provision as provided for in the SPA. The Company is actively marketing for sale the businesses in South Korea, mainland China, Australia, and New Zealand and expects to complete the dispositions within the one year period associated with held for sale assets. Collectively, the European Home Décor Business sale and other planned dispositions represent a strategic shift that has a major impact on the Company's operations and financial results and has been accounted for as discontinued operations. The retained sourcing and trading operations of the former International Division are presented as Other in Note X, Segment Information.
The Company has presented the operating results of the European Home Décor Business as well as the entities to be sold within discontinued operations, net of tax in the consolidated statements of operations for all periods presented. The related assets and liabilities of the disposal groups are presented as current and non‐current assets and liabilities of discontinued operations in the consolidated balance sheets as of December 31, 20X1 and December 26, 20X2. Cash flows from the Company's discontinued operations are presented in the consolidated statements of cash flows for all periods. Certain portions of the former International Division assets and operations are being retained or did not meet the held for sale criteria at December 31, 20X2 and, therefore, remain in continuing operations.
The loss on classification as discontinued operations relating to the remaining entities was measured at the lower of carrying value or estimated fair value less costs to sell and is included in the valuation allowance in the balance sheet as shown below. Completion of the sale of the remaining international operations may be for amounts different from the current estimates and will be evaluated each reporting period until the dispositions are complete.
In accordance with the Company's annual goodwill impairment test $15 million of goodwill in the Australia/New Zealand reporting unit was considered impaired in the third quarter of 20X2 based on a decrease in the long‐term projected cash flows and related estimated terminal value of that business.
Restructuring charges incurred by the International Division that previously had been presented as part of Corporate costs have been included in the measurement and presentation of discontinued operations in all periods presented.
The SPA contains customary warranties of the Company and the Purchaser, with the Company's warranties limited to an aggregate of EURO 10 million. The Company will provide various transition and product sourcing services to the Purchaser for a period of 6 to 24 months under a separate agreement after the closing. Also, as part of the disposition, the Company retained responsibility for the frozen defined benefits pension plan in the United Kingdom.
As part of the European Home Décor Business sale transaction, the Purchaser shall indemnify and hold the Company harmless in connection with any guarantees in place as of September 23, 20X2 and given by Company in respect of the liabilities or obligations of the European Home Décor Business. Further, if the Purchaser wishes to terminate any such guarantee or cease to comply with any underlying obligation that is subject to such a guarantee, the Purchaser shall obtain an unconditional and irrevocable release of the guarantee. However, the Company is contingently liable in the event of a breach by the Purchaser of any such obligation. The Company does not believe it is probable it would be required to perform under any of these guarantees or such underlying obligations.
The major components of discontinued operations, net of tax presented in the consolidated statements of operations for the years ended December 31, 20X2 and December 26, 20X1 include the following.
| (In millions) | 20X2 | 20X1 |
| Sales | $2,564 | $2,758 |
| Cost of goods sold and occupancy costs | 2,019 | 2,119 |
| Operating expenses | 573 | 617 |
| Asset impairments | 90 | — |
| Restructuring charges | 11 | 90 |
| Interest income | 1 | 2 |
| Interest expense |
