ANDREW WILLIS

The Globe and Mail (Alberta Edition) - - NEWS - ANDREW WILLIS aw­illis@globe­and­mail.com

Sears Canada’s demise was far from in­evitable: Chalk it up to an­other case of bad par­ent­ing.

Sears Canada Inc. is one of those trou­bled kids that can blame the bulk of their woes on a bad par­ent.

A 131-store chain is head­ing for liq­ui­da­tion this week, an ugly end to a 65-year-old fran­chise that can be traced back to a se­ries of bad de­ci­sions by Ed­ward Lam­pert, chair­man and chief ex­ec­u­tive of­fi­cer at Chicago-based Sears Hold­ings Corp. and con­trol­ling share­holder in the Cana­dian sub­sidiary.

Mr. Lam­pert made his name as a fi­nan­cial whiz when he left Gold­man Sachs Group Inc. and founded ESL In­vest­ments Inc., the hedge fund that con­trols Sears and Kmart. He ru­ined that rep­u­ta­tion by think­ing those fi­nance skills would make him a great re­tailer.

Sears’s woes can be ex­plained with a few sim­ple num­bers.

The first num­ber is $1.90 (U.S.). That’s how much, a square foot, Mr. Lam­pert and his team were in­vest­ing an­nu­ally on Sears out­lets in the United States, ac­cord­ing to re­search done two years ago by Matt McGin­ley, an an­a­lyst with Ever­core ISI In­sti­tu­tional Equities. In con­trast, Wal-Mart Stores Inc. in­vested $9.70 a square foot in its stores dur­ing that same pe­riod, ac­cord­ing to Mr. McGin­ley.

For a Cana­dian per­spec­tive, think of the ren­o­va­tions seen in re­cent years at Sears ri­vals such as Cana­dian Tire, Home Hard­ware and even Loblaws, which rolled out the Joe Fresh cloth­ing line. Con­trast those spiffy new stores with what you saw on your last visit to Sears. Con­sumers grav­i­tate to the best shop­ping ex­pe­ri­ence and the only way to win those cus­tomers is to con­stantly spruce up your space.

Here’s an­other num­ber: $5.8bil­lion. That’s how much Mr. Lam­pert spent buy­ing back stock in Sears Hold­ings in a five-year pe­riod. In a 2007 share­holder let­ter, Mr. Lam­pert said: “We will not spend money on cap­i­tal ex­pen­di­tures to build new stores or up­grade our ex­ist­ing base sim­ply be­cause our com­peti­tors do. If share re­pur­chases or ac­qui­si­tions ap­pear to be more pro­duc­tive, then we will al­lo­cate cap­i­tal to those op­tions ap­pro­pri­ately.”

Sears Hold­ings bought back its own shares at prices of up to $170. As shop­pers in­creas­ingly steered clear of the stores, that stock has steadily de­clined to $6 lev­els, and the U.S. par­ent is warn­ing that it may fol­low the Cana­dian sub­sidiary into cred­i­tor pro­tec­tion. At some point, Mr. Lam­pert needed to wake up to the fact that his com­peti­tors were on to some­thing when they plowed money back into the busi­ness.

One fi­nal num­ber: five. That’s the num­ber of chief ex­ec­u­tives and pres­i­dents Mr. Lam­pert has seen come and go at Sears Canada in the past four years. Each leader brought their own strat­egy and sen­si­bil­i­ties. Each de­par­ture and ar­rival meant switch­ing the re­tailer’s fo­cus and try­ing some­thing new.

The story Sears Canada vet­er­ans are spin­ning this week is that there was some­thing pre­or­dained in the chain’s de­cline. For­mer CEO Mark Co­hen called it “a most un­for­tu­nate but in­evitable end to an iconic Cana­dian com­pany.”

That just doesn’t fit with the ex­pe­ri­ence of ri­val chains, where the own­ers are steer­ing clear of hand-wring­ing and fo­cus­ing in­stead on build­ing their busi­ness.

Con­sider what is tak­ing place at Loblaw Cos. Ltd., where the stock price is not far off all-time highs. The gro­cery chain had its stum­bles in the past, in part as it rolled out new tech­nol­ogy, but the We­ston clan kept driv­ing for­ward, re­cently rein­vent­ing the busi­ness by ac­quir­ing Shop­pers Drug Mart.

Same story at Ali­men­ta­tion Couche-Tard Inc., where man­age­ment has built a global leader in cor­ner stores by con­sis­tently plow­ing money back into the busi­ness. South of the bor­der, Wal-Mart is mov­ing from strength to strength; its stock is also test­ing all-time highs as the chain rolls out an on­line strat­egy that is ex­pected to re­sult in a dou­bledigit in­crease in sales.

There was noth­ing in­evitable about the demise of Sears Canada. The ex­pe­ri­ence of ri­val chains shows it’s pos­si­ble to rein­vent stores and keep cus­tomers com­ing in the door. The fact that Sears Canada ended up as re­tail road­kill re­flects a fail­ure in lead­er­ship.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.