Last-ditch Sears bid could have saved 10,000 jobs: ex-CEO


The for­mer head of Sears Canada says he had a solid plan to re­vive the in­sol­vent re­tailer but felt con­strained by a court re­struc­tur­ing process that seemed to favour liq­ui­dat­ing the com­pany’s as­sets over keep­ing it afloat.

Speak­ing pub­licly on Mon­day for the first time since Sears Canada was put into liq­ui­da­tion two weeks ago, Bran­don Stranzl also re­sponded to re­cent crit­i­cism from his for­mer boss Ed­die Lam­pert, the CEO of U.S.-based Sears Hold­ings and the largest share­holder of Sears Canada.

In a blog post last week, Lam­pert sug­gested that Stranzl has­tened the demise of Sears Canada through a strat­egy that was “highly risky and un­likely to suc­ceed,” and that a less risky path could have avoided liq­ui­da­tion. Lam­pert, who along with his hedge fund ESL In­vest­ments owned about 45 per cent of the com­pany’s stock, also said he was not told in ad­vance that the com­pany in­tended to file for bank­ruptcy pro­tec­tion in June un­der the Com­pa­nies’ Cred­i­tors Ar­range­ment Act.

“Ed­die is putting forth a fairly valiant ef­fort to bring Sears Hold­ings in the U.S.A. to a bet­ter place and I was re­ally just do­ing the same thing here,” said Stranzl, who was ex­ec­u­tive chair­man of the com­pany un­til an On­tario Su­pe­rior Court re­jected his most re­cent at­tempts to buy the com­pany ear­lier this month. Stranzl, a for­mer an­a­lyst at ESL, was tapped by Lam­pert to join Sears Canada’s board in 2015 and he took on the role of ex­ec­u­tive chair­man that July af­ter CEO Ron Boire left to run Barnes & No­ble.

“I am con­fused by (Lam­pert’s) com­ments. I don’t re­ally un­der­stand them be­cause he was in­formed all the way along,” said Stranzl.

Stranzl said his bid would have seen be­tween 8,000 and 10,000 Sears em­ploy­ees keep their jobs and aimed to keep its pen­sion plan alive, cur­rently un­der­funded by about $270 mil­lion.

He says his plan for Sears, in­clud­ing ini­tia­tives such as cre­at­ing an off-price mer­chan­dise busi­ness and a new Sears pri­vate la­bel, gained trac­tion be­fore the com­pany ran out of money af­ter more than a decade of slid­ing sales and dwin­dling mar­ket share.

Stranzl pointed to the re­tailer’s two quar­ters of con­sec­u­tive same­store sales in­creases be­fore it filed for court-ap­pointed bank­ruptcy pro­tec­tion, and said he had a plan to im­prove the com­pany’s mar­gin ero­sion. Sears’s real prob­lem, he said, was that it op­er­ated for years in an out­moded model as an “ag­gre­ga­tor” of prod­ucts, and it needed a rad­i­cal rein­ven­tion to com­pete with its ri­vals. “Ul­ti­mately we ran out of time,” he said.

Alex Ari­fuz­za­man, part­ner in Toronto-based re­tail real es­tate spe­cial­ists In­terS­trat­ics Con­sul­tants, said a fo­cus on same-store sales as a yard­stick of suc­cess is far too lim­it­ing. “The most im­por­tant thing for re­tailer is net profit,” he said. “You can drive sales by low­er­ing prices and if you get enough traf­fic that can in­crease profit, but that did not hap­pen here. A cou­ple of new ini­tia­tives this late in the game would not have turned it around. (In CCAA), Sears was los­ing seven mil­lion dol­lars a week.”

Had Sears Canada made the bold step of dig­i­tiz­ing its once-strong cat­a­logue busi­ness 15 years ago, Ari­fuz­za­man added, it would have fared far bet­ter.

Given that the com­pany is­sued more than $2 bil­lion in div­i­dends to share­hold­ers that it might have oth­er­wise rein­vested in the busi­ness — a move that riles Lam­pert’s crit­ics, who note he was the big­gest ben­e­fi­ciary of those div­i­dends — any ef­forts were pretty fu­tile at a time when the health­i­est of re­tail­ers are grap­pling with a rapidly chang­ing re­tail mar­ket­place, Ari­fuz­za­man said.

Stranzl be­lieves that liq­ui­da­tion bids should not have been con­sid­ered from the in­cep­tion of the CCAA re­struc­tur­ing process along­side go­ing con­cern bids. The re­struc­tur­ing was set up as more of a sale process than a plan of ar­range­ment, he added, due to fac­tors such as the strict terms of the debtor-in-pos­ses­sion fi­nanc­ing.


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