Sears retirees fume over cuts to benefits
Insolvent retail giant’s moves under fire days after major layoffs, store closures
TORONTO Fears of Sears Canada retirees were realized Thursday when the insolvent retailer confirmed it will seek court approval next week to suspend their health, dental and life insurance benefits as well as special payments to the company’s underfunded defined benefit pension plan, which has a deficit of almost $267 million.
The company filed for CCAA protection from its creditors in Ontario Superior Court on June 22, when it announced the layoffs of 2,900 employees and the closure of 59 stores.
Sears Canada will also ask the court on July 13 to extend the injunction that protects it from creditors until Oct. 4 as it works to find a buyer for the business or its assets.
In the meantime, a group of ousted employees is accusing the retailer’s executives of insensitivity and poor taste for throwing a Canada Day party at Sears’ pop-up store on Toronto’s trendy Queen West strip just days after laying off its employees without severance.
“Who paid for that party?” said Peter Myers, a former senior director of planning at Sears Canada who worked for the company for more than 35 years until he was laid off on June 22.
“I’m pretty sure that I did, with my severance. I am not surprised, but the optics of this are terrible.”
Myers and other former employees also question why the company spent money to form The Cut Inc., a New York-based team of 27 employees hired to work on its new off-price merchandise strategy, to compete with the likes of Winners.
“Why would they do that if they were trying to erase duplication in the company and they had a full buying team in Canada doing the same thing?” Myers said.
Seeking court protection from paying creditor debts is a common way for firms to gain breathing room in order to help revive their business, and Sears Canada has appealed for the same to implement the latest of its many revival efforts over the years. The transformation plan includes an aggressive push into e-commerce, sales of off-price merchandise and a revamped private label collection.
The company’s cash position on its balance sheet fell to $164.4 million in the first quarter of 2017 from $349.8 million in the first quarter of 2016, and the struggling retailer announced in June that it had serious doubts about being able to continue as a going concern as it struggled to meet its obligations coming due over the next 12 months. The retailer’s sales have dwindled to $2.6 billion in 2016 from $6.7 billion in 2001.
The scenario is an all too familiar echo of the demise of Eaton’s for Marinella Gonzalez, who had worked at Sears’s head office for the past 17 years until she was laid off with other head office employees last month. She was an employee of Eaton’s when that department store chain folded in 1999, leaving many employees without severance or benefits. Sears employees who were laid off have been encouraged to make court claims along with other unsecured creditors, as the Eaton’s employees ended up doing.
“Over about five to seven years, we received about 40 cents on the dollar of what we were owed,” said Gonzalez, another vocal critic of Sears’s Canada Day party.
“Landlords are typically secured and bankers are always secured,” said retail consultant Jim Danahy of Customer Lab.
“Employees and retirees and the large and small companies who employ people to make the goods that are sold at (insolvent retailers) are typically the victims in this situation.”