Sears Canada to cut jobs and close stores
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