Sears Canada has exhausted its nine lives? The adventure in its present form seems to be drawing to a close. The retailer, formerly an icon of the retail trade, would soon be sheltered from its creditors.
Last week, when the company’s financial results were unveiled for its first quarter of 2017, management said in a statement that it had “significant doubt about the Company’s ability to continue operating.” The company then pointed out that it was unable to borrow the $ 175 million it needed to meet its financial needs. She could only get $ 109 million.
“It’s a company that has not been able to adapt to changes in consumers, at least not fast enough. Management has taken initiatives to innovate, but too little too late, “deplores Yan Cimon, an associate professor at the Faculty of Business Administration at Laval University. “The company’s classic model allowed it to remain in the industry, but it did not allow it to increase market share,” he continues, believing it possible to survive the banner but in a new form.
“The problem is that branches are no longer meeting the expectations of consumers who are increasingly looking for a destination, a buying experience. […] Sears will need more experience, such as coffee shops or a food service. We should not be afraid to develop new models to make the square feet more profitable, “he said, believing that the current dark period of retailing is not over yet. “Those who cling to their classical model will continue to suffer and disappear.”
On Wednesday, Bloomberg reported that Sears Canada is preparing to turn to the courts to protect itself from its creditors. This would mean a major restructuring of the banner and possibly job losses. Across the country, Sears currently has close to 16,000 workers, including 3,000 in Quebec.
According to a source from Bloomberg, the company would be sold in pieces. The company’s most valuable assets are real estate, but many of the banner stores are located in low-end shopping malls. This would make it more difficult to sell them to a single buyer, noted this person.
In order to be advised on his future, the retailer said he had contacted officials from BMO Capital Markets and Osler, Hoskin & Harcourt.
Not a surprise
For the Associate Professor JoAnne Labrecque, from the Department of Marketing Education at the Hautes Études Commerciales, the situation of Sears is not a surprise. Especially since the company has been struggling for years.
“The march was too high. Adaptations over the years have not been made. The effort required was exorbitant, “she said, considering that the chances of survival of the company are very thin, even with a restructuring. “It’s going to be very difficult. If we decide to reduce the size of the stores, it represents investments. We will also have to convince consumers. It’s medium-term work, not short-term work, “she says.
Last December, Sears Canada announced plans to make the leap in the food sector to attract more customers to their stores, hoping to return to financial health. The strategy was “daring”, “risky” and “far from being won in advance,” said experts at the retail store, as several players such as Walmart, Pharmaprix, Dollarama and Canadian Tire had already opted for this strategy .
In recent years, the retailer has tried to get his head out of the water. By 2015, the cure slimming had reduced the expenses of the company by $ 125 million.
Loss of $ 144.4 million
At the announcement of its latest quarterly report, Sears Canada again recorded a net loss of $ 144.4 million or $ 1.42 per share compared to a loss of $ 63.6 million or 62 cents per share latest.
Quarterly revenues were $ 505.5 million, down 15.2% from $ 595.9 million the previous year.
On Wednesday, shares of Sears Canada (TSX: SCC) fell on the Toronto public prosecutor’s office. On Thursday, the company’s share sold 22.50%, or 18 ¢, to close at 62 ¢. The shares of Sears Holdings, which holds a minority interest in Sears Canada, were down 6% in the morning on the NASDAQ.
According to regulatory documents, Sears Canada’s largest shareholder is Edward Lampert, who also controls Sears Holdings – an entity that owns the Sears and Kmart chains in the United States.
Across the country, Sears owns 95 stores, 23 of which are located in the province.
With The Canadian Press
An impact on the retail trade in Quebec City
The closure of Sears stores would have a major impact on the retail trade in the Greater Québec City area.
The company has three department stores, namely the Galeries de la Capitale, Fleur de Lys and Laurier Québec, as well as a retail outlet in Lévis, Les Galeries Chagnon, and two Sears Décor stores.
For the Fleur de Lys shopping center, which had been forced to complete the Target closure in 2015, the end of the Sears episode would be another blow. Recall that Hudson Bay, which occupies 106,000 square feet of space, will close in September 2017. Approximately 50 workers will be affected by this closure. The management of the mall says it is still in talks to find a new tenant.
The oldest in Quebec
The Sears store in Fleur de Lys is the oldest of the banner in Quebec and the largest in terms of area (187,000 sq. Ft.) In the shopping center. The establishment has more than sixty workers.
“For smaller shopping malls, the challenge for many will be to find a tenant who can fill the space. There are not millions of players, “said Yan Cimon, associate professor at the Faculty of Business Administration at Laval University.
“Even though it was not a top-notch company, it attracted a lot of traffic. If it disappears, it is a further thorn in the foot of the developers real estate, “he continues, not hiding that the situation is worrying for some shopping centers, especially in the region.
On the management side of Fleur de Lys, we closely follow the situation of Sears, who has owned the building since 1963. “We know that the establishment has been selling here for a very long time. They will not be able to sell to anyone. It is certain that we will keep an eye on this file, “notes the general director, Louise Gagnon.