More job cuts seen

Ed Strapagiel, executive vicepresident of Kubas Consultants, said the move was “ part of the fallout of what’s going on in the States. They’re in trouble and they need all the money they can get their hands on.” Hedge- fund manager Edward Lampert combined Sears in the U. S. with Kmart Corp., another declining retailer, in a multibilliondollar deal late last year. But the combined company reported a disappointing profit in the latest quarter. A new chief executive, Aylwin Lewis, was installed late last week. He shunted aside Alan Lacy, the man who had run Sears Roebuck Inc. and remains on Sears Canada’s board of directors as chairman. Lampert is now expected to take a more active role in daytoday management. Though he is seen as a financial whiz capable of boosting the company’s share value in the short term, his abilities as a retailer are less certain, according to analysts.

Investors cheered yesterday’s announcement, sending Sears Canada shares to their highest level in about five years. The stock gained $3.65 yesterday, about 12 per cent, to close at $ 34.45 on the Toronto Stock Exchange. “We trust that shareholders will be pleased with the added value” resulting from the sale, Hollister said.

Analysts have suggested the move was short- sighted because the credit card division contributed some 40 per cent of the Canadian retailer’s profits.

Rating agency Standard & Poor’s downgraded its rating on Sears Canada, calling the credit card business “ a historically important source of earnings and cash flow.”

“ Standard & Poor’s does not expect that Sears Canada will improve its long-term operational performance or market position,” analyst Don Povilaitis said in a report. The spending cuts send a signal that “ growing revenues of the core department store business through new store concepts is not a priority for the company,” the report said. The sale means that 1,000 people employed at Sears Canada card operating centres in Toronto, Ottawa, and Vancouver will be transferred to the American financial services giant. The company acknowledged that more job cuts may be in its future, but would not say how many of its 41,000 employees might be affected.

“ We are reviewing our staffing,” spokesperson Vincent Power said.

“ As we continue forward as a retailer, we want to make sure that we’re staffed right. It may include some reductions; it may not. We’ll approach those as we get close.”

At this point, it’s difficult to guess where jobs may be cut, observers said.

“ I have calls into management but they probably won’t say much. They won’t want to tip their hand ahead of time or scare any employees,” said David Brodie, analyst at Research Capital Corp. in Toronto.

Sears Canada acquired seven stores from the failed Eaton’s chain in 1999. Analysts believe that some, including the Eaton Centre flagship location, remain unprofitable, though Sears does not provide details on individual stores. “The question in the background is the downtown stores they inherited from Eaton’s. Are they making a go of them?” said Brodie. “ We don’t know the answer to that.”

In March 2004, Sears Canada got out of the car repair business, cutting 775 jobs, and a month later confirmed it had eliminated 130 head office jobs. But this latest move marks a philosophical change for a department store that has had a reputation for taking chances, Strapagiel said.

“Sears Canada was always a fighter. They’re always been a go- forward scrapper. Now they’re going to be retreating.”