Sears Canada to cut jobs and close stores

The Star Early Edition - - BUSINESS REPORT | INTERNATIONAL - So­la­r­ina Ho

SEARS Canada said last week that it planned to cut jobs and close about a quar­ter of its stores as it re­struc­tures its op­er­a­tions af­ter a steady de­cline in sales be­cause of com­pe­ti­tion from big-box re­tail­ers and on­line mer­chants.

Like many de­part­ment stores, the Toronto-based com­pany has strug­gled for years to at­tract fash­ion-con­scious shop­pers who have em­braced ap­parel stores more adept at keep­ing up with fast-chang­ing cloth­ing trends.

The com­pany, which in 2012 was spun off from US de­part­ment store pi­o­neer Sears Holdings, said it planned to close 59 of its 225 stores and cut 2 900 of its 17 000 work­ers as part of a restruc­tur­ing ap­proved by an On­tario bank­ruptcy court.

Sears Canada said it also planned to file a mo­tion to re­quest per­mis­sion to sus­pend cer­tain monthly pay­ments to its pen­sion plan, be­cause it was run­ning low on cash, ac­cord­ing to court doc­u­ments.

It said it also in­tended to stop pay­ments to a post-re­tire­ment ben­e­fit plan that pro­vides re­tirees with life in­sur­ance and med­i­cal and den­tal ben­e­fits, ac­cord­ing to the fil­ing.

Wind­ing down

Re­tail ex­perts said that they were not con­vinced the com­pany would suc­ceed in its ef­fort to re­main in busi­ness, but noted that it could get more for its as­sets by wind­ing down its op­er­a­tions in sev­eral phases, rather than pulling the plug through a liq­ui­da­tion.

“It’s just been baby steps to­wards the ul­ti­mate end,” Sally Se­ston, the man­ag­ing di­rec­tor at Re­tail Cat­e­gory Con­sul­tants, said. “A forced liq­ui­da­tion be­comes a fire sale.”

“One way or another, it’s not go­ing to be an easy road for

Ex­ist­ing lenders have agreed to pro­vide up to C$450 mil­lion in in­terim fi­nanc­ing.

them, as is the case with all de­part­ment stores,” Mau­reen Atkin­son, a se­nior part­ner at re­tail con­sult­ing firm JC Wil­liams Group, said.

Ex­ist­ing lenders have agreed to pro­vide up to C$450 mil­lion (R4.37 billion) in in­terim fi­nanc­ing to help the com­pany con­trolled by billionaire hedge­fund in­vestor Ed­die Lam­pert fo­cus on sell­ing dis­counted de­signer la­bels and low-priced cloth­ing.

The plan shifts away from ar­eas long as­so­ci­ated with the iconic Sears brand, such as tools, elec­tron­ics and car parts. A spokesper­son said the re­tailer would con­tinue to sell home ap­pli­ances.

Lou Brzezin­ski, an at­tor­ney who rep­re­sents sev­eral of the re­tailer’s land­lords and sup­pli­ers, said his clients were re­lieved that the com­pany had not given up.

“It’s a mea­sured and a rea­son­able ap­proach to con­tin­u­ing op­er­a­tions in Canada, and we’re happy to see that,” Brzezin­ski said, but noted the fall­out would hit em­ploy­ees and re­tirees the hard­est.

“It’s the older peo­ple who need the money for their med­i­cal ben­e­fits and their den­tal ben­e­fits. They’re the ones who’re go­ing to have to pay the price.”

The com­pany has to­tal liabilities of C$1.1bn as of April 29, ac­cord­ing to fi­nan­cial dis­clo­sures. That in­cludes out­stand­ing loans, ac­counts payable, pen­sions and other debt.

About 78 per­cent of Sears Canada shares are held by Lam­pert and oth­ers close to the com­pany, ac­cord­ing to data. – Reuters

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