Best Buy, Sears lay off 1,600
News comes weeks before Target opens first of 124 stores in Canada
TORONTO • Two of Canada’s biggest retailers, Best Buy Canada and Sears Canada Inc., announced layoffs Thursday in what is shaping up to be a turbulent and competitive year for the country’s retail sector.
Best Buy Co., the biggest seller of home electronics in the country, laid off an estimated 900 employees and announced the closure of 15 bigbox stores, representing about 10 per cent of its square footage in this country. The move comes as Best Buy faces pressure from online electronics retailers such as Amazon and Apple and as it follows in the step of its U.S. parent with plans to open multiple smaller stores that are less expensive to operate.
Sears Canada, trying to stanch years of falling sales and profits, laid off 700 employees, about 360 at its department stores, 300 from distribution centres, and the remainder at head office and support areas.
“The retail landscape continues to change and our success is dependent upon our ability to evolve along with it,” Mike Pratt, president of Best Buy Canada, said in an exclusive statement to the Financial Post. “By taking a proactive approach in transforming our operations now, I have no doubt we will be in the best position to continue innovating our store experience for consumers and grow into the next decade.”
The news comes just weeks before mass merchant Target is set to open the first of its 124 stores in Canada, a move creating a ripple effect at retailers across the country, from Walmart to Canadian Tire.
More vast strategic changes are ahead as Canadian consumers increasingly shop online or seek out the more tailored service from small stores, said retailing consultant Wendy Evans, president of Toronto-based Evans and Co. Consultants Inc., who has tracked the steady migration of U.S. retailers into Canada over the past three decades.
“There is going to be a restructuring and a right-sizing in retail,” she said. “Electronics and books are on the forefront of that, with specific names and brands that you can compare anywhere and buy online.”
Before the rise of online merchandising, with its low overhead and endless array of colour and size options, big-box stores were known as “category killers,” with the best available selection and the lowest prices.
“It has been quite a profligate use of space,” Evans said. As the country emerged from recession, traditional enclosed shopping malls have been fighting back by remodelling and leasing increasingly large spaces to their tenants. Traditional department store Sears “also has too much space to be competitively productive, and there are other issues there,” she said.
Best Buy will close eight Future Shop and seven Best Buy locations in B.C., Quebec, Manitoba, Alberta and Ontario. It said over the next three years it will begin to open a substantial but unspecified number of smaller Future Shop web stores and Best Buy Mobile locations across Canada.
The move comes almost a year after the company’s embattled U.S. parent announced it would close 50 outlets and open 100 smaller mobile stores with a greater emphasis on smart phones, tablets, and e-readers.
Sales at stores open for more than a year were flat over the nine weeks ended Jan. 5 in the U.S., higher than analysts expected them to be.
But the company said same-store sales fell 6.4 per cent internationally because of declines in Canada and China — two markets called out by the U.S. parent for sales declines in the first three quarters of 2012. Yearend and fourth-quarter results are due out Feb. 28.
At Sears, the layoffs come amid a tough winter for the Canadian department store chain and as the company approaches its fiscal yearend.
They are “part of our initiative to rightsize the organization, which is working in concert with other initiatives to make Sears successful,” spokesman Vincent Power said in an email.
On Christmas Eve, Sears Canada’s chief financial officer Sharon Driscoll abruptly left the organization.
Two weeks later, Sears Canada confirmed a statement from majority owner Sears Holdings that its fourth-quarter adjusted earnings before taxes, depreciation and amortization would be about half the level of last year’s fourth-quarter of $97 million US.
Same-store sales, a critical retailing bellwether, slid 5.8 per cent in the nine weeks ended Dec. 29. Fourth-quarter and year-end results will be made public on Feb. 27.
Last winter, the retailer laid off 470 employees. Sears, which has seen its annual sales and profits fall since 2006, now has a Canadian workforce of 29,300.
Company CEO Calvin McDonald has been striving to freshen up the chain’s stores and merchandise since joining the retailer in mid-2011, with a plan to get the company in better shape by the end of fiscal 2014.
Sears has also exited underperforming locations, closing three stores in Vancouver, Calgary and Ottawa last year and selling the leases back to landlord Cadillac Fairview Corp. Ltd. for $170-million.
It sold its stake in a Medicine Hat, Alta. mall last month for $43 million.