CEO SHOPPING
Sears Canada loses third chief executive in four years.
TORONTO • Whether it was family reasons or displeasure with Sears Canada Inc.’s corporate parent that prompted the enterprise’s newest CEO Doug Campbell to walk away from the top job, his exit adds up to bad news for a company desperately seeking a buyer that may not materialize.
Mr. Campbell is the second chief executive to leave the embattled department store chain in just over a year, and by all accounts, he was an equally competent one.
Sears Canada announced Thursday that the former U.S. Marine pilot and corporate turnaround specialist will leave the company by the end of the year due to family reasons.
“It is hard to imagine a strong executive leader wanting to stay at Sears over the long-term,” said Antony Karabus, chief executive of Northbrook, Ill.-based SD Retail Consulting. He noted prior CEO Calvin McDonald quit Sears Canada a year ago to run a smaller but healthier business, beauty retailer Sephora Americas, amid rumours of an ideological clash with controlling shareholder Sears Holdings Corp.
Mr. McDonald succeeded Dene Rogers, who stepped down in 2011.
“It’s clear that the objective has been to return the highest financial result back to the primary shareholder rather than reinvest in the business,” Mr. Karabus said.
Mr. Campbell’s move comes less than two weeks after Edward Lampert, the CEO and largest shareholder of Sears Holdings, made a controversial move to loan the distressed U.S. retailer US$400-million from the hedge fund he owns, ESL Investments. The loans are secured by liens on 25 properties owned by Sears, whose shares have plunged 28% since the announcement 10 days ago.
Amid eight straight years of falling sales, Sears Canada has raised cash in recent years by selling a number of high-profile leases to its landlords at coveted urban malls, and has tried to shave costs and outsource its non-core operations.
But industry critics have questioned Sears Canada’s decision to issue special dividends after closing its rich asset sales to the benefit of shareholders, particularly Mr. Lampert, but to the seeming detriment of its core retail business. Sears Canada issued a $509-million special dividend late last year after selling back a number of plum urban leases to landlords, a year after it had issued a special dividend of $102-million.
In the meantime, Sears Holdings has thus far come up empty in its search to find a buyer for its 51% stake in Sears Canada. The U.S. retailer said in May it was exploring options including a possible sale of the investment. Sears Canada said on Thursday that the search continues.
“I suspect Campbell’s reason [for leaving] has something to do with what went down in the U.S. — selling off Sears Canada has failed to come through, and that changes its prospects,” said Alex Arifuzzaman, partner in Toronto retail real estate specialists InterStratics Consultants. “They had no takers.”
Competition in the market has only grown stiffer since the entry of Target Corp. into Canada last year, and that chain’s poor performance may complicate matters for an interested buyer, even one looking at a handful of leases rather than the whole chain.
“Both Sears Canada and Target Canada are posting substantial operating losses,” retailing analyst Keith Howlett of Desjardins Securities wrote in a note to clients Thursday.
“The longevity of one may potentially be prolonged by the demise of the other. Long-term prospects for both of them appear to be very challenging.”
The analyst noted, however, that Target Canada has a modern store network and is growing its overall sales off of a low base, while Sears has a shrinking store network in need of reinvestment and its overall sales are declining.
At Sears Canada, annual sales dwindled to $3.9-billion in 2013 as it faltered in the face of competition from Best Buy Co. Inc., Canadian Tire Corp. and a resurgence at Hudson’s Bay Co.; in 2001 the retailer had sales of $6.7-billion.
Mr. Howlett expects there will be no declaration of a special dividend until the release of fourth-quarter results.