Shares in Sears Canada were halted Thursday morning after the retailer applied for and was granted protection from its creditors under the Companies' Creditors Arrangement Act — the law that covers insolvency proceedings.
The move gives the retailer 30 days to restructure itself, which includes $450 million in debtor-in-possession financing to fund the company while it restructures, a process that will include closing dozens of locations and laying off thousands of workers.
The chain will axe 20 full Sears stores, 15 Sears Home Stores, all 10 outlet stores and 14 Sears Hometown stores — roughly one-third of its current retail footprint.
Affected locations are listed here:
|Sears stores||Sears Hometown stores||Outlet stores||Sears Home stores|
|Medicine Hat, Alta.||Cold Lake, Alta.||Abbotsford Retail, B.C.||Calgary|
|Grande Prairie, Alta.||St. Albert, Alta.||Winnipeg Garden City||Edmonton Skyview|
|Lloydminster, Alta.||Okotoks, Alta.||Halifax Outlet||Ancaster, Ont.|
|Red Deer Relocation, Alta.||Spruce Grove, Alta.||Cornwall, Ont.||Woodbridge, Ont.|
|Kamloops Aberdeen Mall, B.C.||Ft. McMurray, Alta.||Chatham, Ont.||London, Ont.|
|Bathurst, N.B.||Leduc, Alta.||Cambridge, Ont.||Scarborough, Ont.|
|Saint John, N.B.||Sherwood Park, Alta.||Timmins, Ont.||Kingston, Ont.|
|Corner Brook, N.L.||Creston, B.C.||St. Eustache, Que.||Ottawa East|
|Truro Mall, N.S.||Sechelt, B.C.||Montreal Place Vertu||Sudbury, Ont.|
|Dartmouth, N.S.||Grand Forks, B.C.||Sorel, Que.||Windsor, Ont.|
|Brockville, Ont.||Orangeville, Ont.||Orillia, Ont.|
|Sault Ste. Marie, Ont.||Rimouski, Que.||St. Bruno, Que.|
|Hull, Que.||Rouyn-Noranda, Que.||Laval, Que.|
|Chicoutimi, Que.||Melville, Sask.||Quebec City|
|St. Georges de Beauce, Que.||Ste. Foy, Que.|
|Moose Jaw, Sask.|
|Prince Albert, Sask.|
All other Sears locations will remain open, the chain said, and the company "plans to continue to operate a large number of stores, continue to maintain significant employment, and to service its customers across Canada," Sears said in a court filing.
About 500 office positions at the company were to be eliminated immediately. The remainder of the job losses will come as Sears closes stores. As of May 30, the company employed approximately 17,000 people, with 10,500 in part-time positions and the rest working full-time.
Trading in the shares was halted before the Toronto Stock Exchange opened on Thursday, pending news. Minutes later, Sears Canada announced its plan in a press release.
The stock has lost more than 80 per cent of its value on the TSX since the start of the year, and at 62 cents a share, is well below the $40 it traded at back in the year 2000.
As a result of the CCAA proceedings, Sears Canada's shares will eventually be delisted from the TSX.
The company has seen a huge drop in its revenues compared to several years ago, waylaid by a changing retail landscape and tougher online competition. About a year and a half ago, the company revamped its operations and the early indications are that Sears has made progress since then, with same-store sales growth for two quarters in a row.
That's an encouraging sign for the chain, but Thursday's move signals that the company thinks more drastic changes are needed.
"The continued liquidity pressures facing the company as well as legacy components of its business are preventing it from making further progress and from restructuring its legacy assets and businesses outside of a CCAA proceeding," Sears said.
The causes of Sears' problems are complex, but there is one big threat that has hit many retailers of late: "One word — e-commerce," said Mirella Pisciuneri, a partner at Richter consultancy, who isn't working on Sears' restructuring but has handled similar ones in the past.
The rise of online selling has squeezed Sears and many other retailers, as customers can now comparison shop online and online sellers have much lower costs. It is somewhat ironic that online selling is such a major threat for Sears today, considering how the chain got its start.
Parent company Sears Roebuck & Co. set up shop in Canada in 1952 and was predominantly a seller of merchandise by mail, via the company's popular catalogue.
But the landscape has changed since the golden age of department stores, and Sears now finds itself without an obvious market niche.
"If you want upscale you go to The Bay," Pisciuneri said in an interview, "you want low cost you got to Walmart.
"Who is Sears right now?" she said. "Why go to Sears?"
Bruce Winder, founder of the Retail Adviser Network, says the biggest problem for Sears is it got complacent over the years and didn't keep up with the times.
"Momentum in retail takes years to gain and years to lose, but once you lose it, it's gone, and I think that unfortunately they've lost that momentum," he said.
"If you go back 10, 20 years, retailers need to evolve," Winder said. "They need to constantly look at their customer base and their stores, and keep investing to renew that."
Sears says it's doing exactly that, with its relaunch in late 2015 showing early indications of slumping sales turning around ever so slightly.
"The new brand positioning is starting to resonate with consumers," Sears said in a release Thursday.
Pisciuneri said Sears faces an uphill climb, but she's confident that it's not too late for the chain to save itself.
"It's not impossible, but there's a lot of work that needs to be done."
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