Sears Canada Closing 59 Stores as It Seeks Bankruptcy Protection
Retail’s bloodbath has spread north of the border.
Sears Canada announced on Thursday it has entered bankruptcy protection in the Great White North and will close 59 stores and slash nearly 3,000 jobs while it tries to get back on its back after a years-long slump.
The retailer, which was spun off from Sears Holdings (SHLD) in 2012, won protection from creditors under Canada’s equivalent to a Chapter 11 knowns as “Companies’ Creditors Arrangement Act” and said it plans to exit bankruptcy “protection as soon as possible in 2017, better positioned” to executive a turnaround.
Sears Canada, which is independent of its U.S. namesake, will close 20 of its 94 full-service locations, 15 home stores, 10 outlet stores and 14 hometown locations and will cut 2,900 positions across its store fleet and at its Toronto headquarters.
The spin off in 2012 was one move made by Sears Holdings CEO and top investor Eddie Lampert to raise urgently needed cash will inflict pain on Sears Holdings: the U.S. namesake company still owns 12% of Sears Canada, and Lampert and his investment vehicles still own about 45% of its shares. Sears Holdings has also been closing stores and failing to hang on to shoppers: last week, the retailer, which also operates the Kmart discount chain, said it was cutting 400 jobs at its Chicago area headquarters in addition to a previously announced $1.25 billion cost restructuring of the company.
Its Canadian siblings said in its statement that “the continued liquidity pressures facing the company as well as legacy components of its business are preventing it from making further progress.” Last week, it issued a warning that it might not be able to generate enough cash to meet debt payments and other obligations in the next year. Sears Canada has posted losses in its last three fiscal years. (Sears Holdings, which is run entirely independently, stoked its own bankruptcy chatter when it acknowledged fears in the marketplace about its longer-term viability in its annual report released in March.)
As for Sears Canada, its much-hoped for comeback involves selling more discounted designer fashions and its own house brands while also improving its e-commerce, things its rivals have been doing for years.