Sears under pressure to sell before Christmas
Liquidation should occur soon to keep buyers in, report says
If Sears Canada is to shut down completely, it would be best to get it done before Christmas, according to a report from the monitor handling the troubled retailer’s insolvency.
“Sears Canada is operating at a substantial weekly loss,” according to the report from FTI Consulting Canada Inc., adding that with each passing week the amount of money available to unsecured creditors is reduced as a result.
“Liquidation sales in the retail industry yield better results if they are completed before and during the lead up to the December holiday season.”
Seven parties thought to have an interest in buying or investing in a restructured Sears Canada were approached after Sears filed for creditor protection, according to the monitor’s report.
Only three responded with interest, including a group led by Brandon Stranzl, who stepped away from his responsibilities as Sears Canada’s executive chairman in order to focus on a plan to rescue the company.
In the end, however, none of the offers that were made met all the requirements, including financing, according to the report.
The monitor is continuing to work with the Stranzl group, but points out that time is running out.
So far, 59 of the retailer’s stores have been closed and 2,900 employees have lost their jobs.
On Friday, the company announced that another 11 stores, including the Sears locations at Fairview Mall and at Scarborough Town Centre, will also close. Altogether, 1,200 people at those stores will lose their jobs.
In all, 22 applications to the Employee Hardship Fund have been made and 15 approved, according to the monitor’s report. That fund was created using money donated by company executives who were being paid retention bonuses. But the fund’s future is now in doubt, according to the monitor’s report.
If someone does swoop in with an offer for the company, Sears Canada will not be the retailer it once was, according to Alex Arifuzzaman, partner at InterStratics Consultants Inc.
“They sold off the crown jewels,” Arifuzzaman said.
Sears Canada has sold off some of its prime leases over the past few years, including spots at Toronto Eaton Centre, Yorkdale Shopping Centre and Square One Shopping Centre. The list of stores added to the sale list on Friday also included Oakville Place and Lime Ridge Mall in Hamilton.
“It’s going to be a smaller network of stores. Maybe they can make something of it, but Sears of the past is done,” Arifuzzaman said.
Maureen Atkinson, senior partner of research insights at J.C. Williams Group, said it seemed premature to exit properties that could have been part of a deal to keep the retailer going.
While some landlords may be left in the lurch by Sears stores closing, others will no doubt see it as an opportunity to rent the space to tenants that will draw more foot traffic, Atkinson said. They may also be able to rent the space at a higher rate because anchor stores such as Sears that negotiated rents decades ago typically pay lower rents than other tenants.