Sears deal with Primark could impact Canada
TORONTO • Edward Lampert is taking a page out of Richard Baker’s playbook, and it’s one that could pave the way for U.K. fast fashion retailer Primark to enter Canada.
The chairman and CEO of Sears Holdings Corp. struck a leasing deal Monday that will see the Dublin-based retailer open stores inside seven of the distressed department store chain’s U.S. outlets in the northeast, including a plum spot at one of the most productive A-list shopping centres in the U.S., the King of Prussia Mall near Philadelphia.
“We could look at relationships with other organizations if there was a way to meet the business needs for Sears, and perhaps make selling space more efficient, more productive — all of these things we could look at,” said Vincent Power, Sears Canada spokesman, when asked about Primark, adding no deals were in the works at the moment.
The strategy is not novel to Canada. Real estate maven Richard Baker shook up the retail real estate landscape in 2008 with his purchase of Hudson’s Bay Co. and unique vision of the playing field: Rather than regarding all outside retailers as competitors, he viewed many of them, even those who sold in overlapping categories, as potential partners who could en- hance his core business.
Since 2011, HBC has opened 10 of the U.K.’s TopShop stores within its department stores in a bid to make more productive use of its vast square footage. HBC similarly transformed 20,000 square feet of its Toronto flagship location to open the country’s first Kleinfeld Bridal boutique this year.
Sears Canada has also been leveraging real estate for the past three years amid declining sales and operating profits, selling back its most valued urban leases to landlords and inking deals to expand land near stores in Calgary and Burnaby, B.C. into residential high-rises with an option for additional retailers on the properties.
Mr. Lampert said in a statement that teaming up “with a globally recognized brand such as Primark to help establish its store base in the northeastern United States is testimony to both our attractive store locations and our focus on transforming Sears by working with other retailers, mall owners and brands.”
Facing dwindling sales and a cash crunch, Sears has been quickly raising money in a variety of ways, including a recent offering to sell its 51% stake in Sears Canada to its own shareholders. The deal would make Mr. Lampert and his hedge fund ESL the largest shareholders of Sears Canada, with a 47% stake.
Kelly Tackett, U.S. research director at retail advisory firm Planet Retail, said Primark’s deal with Sears provides the U.K. brand with space in some of the country’s top shopping malls. Sears struck a similar but smaller-scale deal in 2010 with Forever 21, a fast fashion rival of Joe Fresh, Primark and H&M, at its Costa Mesa, Calif. Department store.
“Traditionally a lot of European specialist chains come in through large [stand-alone] flagships,” Ms. Tackett said.
“This instantly provides Primark with a large footfall that clearly they will benefit from in terms of building awareness.”
Primark will lease 520-thousand square feet from Sears over the next 12 to 18 months. In six of the malls, Primark will operate as a subtenant of Sears, and the department stores will continue operating on a smaller scale. In the King of Prussia Mall, the Sears store will close and Primark will join Dick’s Sporting Goods as a subtenant of Sears.
“It would be a great way for Primark to go into Canada, and it would be the optimal scenario for Sears Canada to get rid of some of that space,” Ms. Tackett said.
“Primark, like TopShop, has been fairly deliberate in its store opening plans and new market expansion. If they find the [U.S.] stores prove to be profitable way to build traffic and sales off the bat, then anything is fair game.”
There are many other potential spaces within existing large Sears U.S. stores for the fashion retailer to lease or buy, she said.
Sears is looking to raise more cash, announcing it is planning a rights offering that may raise up to US$625-million.