Sears Canada seeks creditor protection
Strives to remain player while under creditor protection
Sid Mohan, 29, had a job interview at 3 p.m. Thursday, so he popped into a nearby Sears Canada store at lunch time and bought a blue and white plaid cotton dress shirt for $39.99.
“I could get something like this for $25 at Winner’s or Wal-Mart,” he said in the checkout line at the Sears in the Fairview Mall, in suburban Toronto. “But I didn’t have time. This is the closest to my house. Plus I wanted to get some food and look around.”
Like many Canadians, Mohan and his family have depended on Sears for basics, such as clothing and appliances. But that relationship may be in jeopardy. On Thursday, lawyers for Sears appeared in bankruptcy court in Toronto, where a judge granted the venerable retailer protection from its creditors.
The TSX and Nasdaq suspended trading in Sears shares. Sears said it will close 59 stores and lay off 2,900 workers.
Sears said it will use the court protection to continue its “reinvention,” and vows to remain a major retail player in Canada. But trends in retail and Sears’ own struggle suggest that department store chains are fighting an uphill battle.
“General merchandise is a category from the last century,” said David Lewis, an assistant professor at the Ted Rogers School of Management at Ryerson University.
“If people want inexpensive they go online, and if they want expertise they go to an expert.”
He noted that Sears has already shed several categories, such as electronics, hardware and automotive, and he predicted that, if it survives, Sears will have to stop selling appliances, too.
As for clothing, long a mainstay at Sears, “they are being eaten away at the top end by Neiman Marcus and The Bay, and at the bottom end by Costco and Walmart,” Lewis said.
Sears said Thursday that the 59 stores that will shut include 20 full department stores from Newfoundland to British Columbia, along with 15 Sears Home stores, 10 Sears Outlet stores and 14 Sears Hometown locations. Quebec and Alberta are hardest-hit by the closures.
The company has been shrinking for years, from $6.7 billion in sales in 2001 to $2.6 billion in 2016. The retailer’s net loss more than doubled year-over-year in the first quarter of 2017, and last week it pulled the plug on its annual meeting.
Sears had no one available for comment Thursday. It insisted in a news release that it has a workable plan to return to profits.