Sears Canada to close three stores
Sears Canada Inc. said Friday it is closing three of its stores in Vancouver, Calgary and Ottawa as the scuffling retailer continues to contend with deteriorating sales and shrinking market share
Andy Clark/Reuters
Hollie Shaw
Sears Canada Inc. is closing three of its stores in Vancouver, Calgary and Ottawa as the struggling retailer continues to contend with deteriorating sales and shrinking market share.
The department store chain said Friday that it is selling three of its leases back to landlord Cadillac Fairview Corp. Ltd. for a total of $170-million. The three stores are in major city shopping malls — Vancouver's Pacific Centre, Calgary's Chinook Centre and Ottawa's Rideau Centre. The Sears in Calgary has been open since 1965, while the other two have been operating since 2000.
Calvin McDonald, the chief executive officer hired last June to spearhead a turnaround at the flagging retailer, has outlined a three-year-plan to turn it around, and is under the gun before the arrival of rival Target Corp. in Canada next year.[np-related]
"We didn't plan to sell any stores and don't plan to sell any [more]," Mr. McDonald said in an interview, adding the business accepted a deal providing a considerable financial benefits to Sears. "At those three locations, the balance of sales in them didn't reflect our category strengths as a retailer. We are constantly reviewing and evaluating our business, but we are not considering any [additional closures] right now."
Shutting stores is a strategy undertaken in January by Sears Holdings Corp., which owns 96% of Sears Canada, and whose business has deteriorated steadily in recent years. Sears Holdings plans to shut up to 120 of its Sears and Kmart outlets.
Sears Canada plans to exit all three locations by Oct. 31. Unlike in the U.S., however, the retailer will realize a financial benefit from the transaction.
"Sears Canada has a strong balance sheet underpinned by owned real estate and valuable under-market leases," said Keith Howlett, retail analyst at Desjardins Securities in Toronto.
"These assets afford the company some additional breathing room as it seeks to turn the tide of declining sales and profitability."
He estimated Sears Canada will forgo annualized revenues of $160-million to $200-million and an annual store-level contribution of approximately $6-million to $10-million by exiting the three shopping centre locations.
Mr. McDonald has shed excess inventory and reworked the company's pricing program to bring it more in line with retailers such as Walmart, trimming everyday prices on a broad number of high-volume goods and offering regular deep discounts on selected merchandise weekly to draw customers in.
Employees at the three locations will have a chance to apply for jobs at other Sears Canada stores. The company will also considering opening other stores in Vancouver, Calgary and Ottawa. Sears Canada has a number of other within a 10-kilometre radius of the closing locations in each city, Mr. McDonald said. In the coming months Sears Canada will open four new pilot formats at existing locations in Ontario in a bid to improve productivity.
In February, Sears laid off 400 employees in its head office and stores, as part of changes related to Mr. McDonald's turnaround plan.
Sears Canada Inc. announced last week that profit fell by more than half in the fourth quarter ended Jan. 28 to $38.7-million, or 36¢ a share, from $82.7-million, or 77¢ a share, a year ago. Sales at established stores, a key measure for retailers know as same-store sales, tumbled 7.4%. Revenue fell 6% in the fourth quarter to $1.37-billion.
After five years of annual declines in revenue, net earnings and same-store sales, in fiscal 2011 the retailer suffered a loss of $60.1-million, or 58¢ per share, compared with earnings of $115.2-million, or $1.07, in fiscal 2010.
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