Sears Canada wants a CEO to stick around
Confident in the strategies outlined in a new turnaround agenda
Brandon Stranzl knows he needs to find a new chief executive to run Sears Canada Inc., which doesn’t have the greatest track record when it comes to holding on to its CEOs.
But the retailer’s executive chairman sounds more passionate right now about bumping up its sales performance, which has fallen for the past nine years to $3.4 billion.
“We don’t want to make a decision and fill the role just because we have a role to fill,” said Stranzl, who spent Wednesday, his 41st birthday, outlining a slate of new strategies to improve the struggling retailer’s outlook beyond just selling plum leases and pieces of its real estate to landlords.
“This company has been through too many CEOs in the past four years.”
Stranzl, who has an extensive background in investment, asset management and analysis in the U.S., joined the retailer’s board as chairman at the behest of Eddie Lampert, whose investment fund owns 48 per cent of Sears Canada. Stranzl was asked to help run the department store retailer and named executive chair when Ronald Boire announced in July that he was departing to run the book chain Barnes & Noble after spending just six months in the role. (Since Dene Rogers left in 2011, three successive CEOs have left Sears Canada, each with a shorter tenure than his predecessor).
Stranzl is keen to emphasize that Sears can succeed as a retailer that fits in a niche between discount chains like Walmart and more upscale apparel and home goods retailers, and to counter its reputation in recent years as a business sustaining itself by selling off its leases, cutting costs through layoffs and outsourcing non-core business departments such as finance and IT while investors wait for a suitor that has yet to come.
Improving Sears Canada’s sales sits at the top of his turnaround agenda, and while that was a stated goal of the company’s former CEOs, Stranzl thinks Sears Canada is finally at a point where it can make good on the promise.
Overall revenue in the second quarter ended Aug. 1 fell 9.1 per cent, but Stranzl points to steady improvement in Sears Canada’s “core retail” network of 95 department stores and 45 Home Stores, where same-store sales turned positive in June and it a level of four per cent to 4.5 per cent in June, July and August. Overall same-store sales, which track volume at locations open for more than a year, fell one per cent in the quarter.
“We have spent two to three years clearing out excess, aged inventory, we put new products in the store beginning in the second quarter of this year and you can see, our sales trend has turned,” he said.
“We expect that things should be able to continue along this trend line because we have really good merchandise coming in right now. We want to grow the retailer. We are very focused on that.”
Sears has secured the help of some of its key brands to help on not only the product improvement metric, but inside its stores. Twelve brands including Clarks, Dockers and Levi’s have agreed to open 200 vendor-branded, shop-in-shops at Sears for which they will do their own fixturing and marketing. It’s a strategy used in recent years by Best Buy, where vendors such as Samsung, Microsoft and Apple have opened shop in shops within the electronics chain’s Canadian stores.
Stranzl notes that the vendor agreements will help to a degree with the retailer’s cost base, which is still too high given its sales slide from $6.7 billion in 2001 to $3.4 billion last year.
But the retailer still announced $28 million in further asset sales on Wednesday, including the sale of a warehouse for $18 million and a $10 million sale and leaseback of a non-mall store that will remain open. Sears Canada also plans to cut annual operating expenses by a further $100 million to $125 million in 2015, a move that will incur estimated one-time costs of $15 million to $20 million in the current quarter that began Aug. 2.
The cuts will be made “all across the board,” Stranzl said. “It’s over 100 different things — every area.” With annual sales general and administrative expenses of $1.2 billion, “We are taking out about 10 per cent (in 2015), which isn’t a massive adjustment when you consider that business has got smaller by more than that. Every dollar we spend on cost has to be revenue generating.”
A CEO with staying power might also improve the picture for Sears, though Stranzl cites no specific timeline. “It would be great to have a Canadian,” he said, with a proven track record. “The requirement would have to be somebody who Canadians would trust.”
This company has been through too many CEOs in the past four years.