Sears Canada closing down: Introduction
On May 24, 2017, we released our vlog RETAIL BANKRUPTCY WATCH LIST: WHAT THIS 102 YEAR OLD TEACHES US ABOUT RETAILING. We discussed and analyzed the state of retail in 2017 in North America. At that time, there was no announcement about Sears Canada closing down.
Shortly afterwards, Hudson’s Bay Company announced massive job cuts. We had just uploaded our vlog HUDSON’S BAY COMPANY NEWS 2017: JOB CUTS for publication on June 14, 2017 when Sears Canada Inc. (Sears Canada) dropped a bombshell.
Sears Canada closing down: Sears Canada today
Sears Canada is an independent Canadian online and brick and mortar store merchant whose head workplace is in Toronto. Sears Canada’s special positioning is that it provides customers Sears tagged items, developed and straight sourced by Sears Canada.
It additionally is a leading rated mattress retailer in Canada, as well as the leading home appliance company in Canada. Sears Canada is undertaking a reinvention. It consists of brand-new consumer experiences at every touchpoint, a brand-new e-commerce system, as well as a brand-new collection of customer care principles developed to supply special experiences to consumers.
Sears Canada closing down: Sears Canada news release
It is a case of too little too late. The market is not responsive to Sears Canada’s efforts to rejuvenate its company. On June 13, 2017, Sears Canada revealed financial news for the 1st quarter of the financial 2017 year. Sears Canada divulged that:
- earnings was $505.5 million in the first quarter, a decrease of 15.2% as compared to the same quarter the year earlier;
- the gross margin was 22.6% in the first quarter of 2017, as compared to 28.2% for the very same quarter in 2016;
- EBITDA was a loss of $133.9 million in the first quarter compared with a loss of $75.4 million for the same quarter in 2016;
- the bottom line for the very first quarter was a loss of $144.4 million or $1.42 each share compared with a bottom line loss of $63.6 million or 62 cents each share in the very same quarter the year earlier; and most notably
Sears Canada divulged it requires either a financial restructuring or sale of the company. It also stated it does not have enough money to last through the current year.
The Toronto Star reported that Sears Canada attempted to soothe customer fears despite advising it has ‘substantial doubt’ regarding its future. The article quoted several insolvency lawyers and our Ira Smith in this write-up.
Since Sears Canada has made this statement:
- customers will certainly be worried about getting products paid for however not in supply at the time of payment;
- consumers will certainly be worried about any kind of service warranty Sears Canada offers; and
- vendors will certainly be worried that they will not be paid for items delivered to Sears Canada.
Sears Canada closing down: How did we get to this point?
Sears Canada started in 1952 as a mail-order collaboration between Sears Roebuck Co. in the United States and Toronto’s Robert Simpson Company. They opened the very first Simpsons-Sears shop in Stratford, ON, in 1953. The mail-order as well as outlet store version was effective, for a long time.
In 1994, Wal-Mart introduced itself in Canada. It brought deep price cuts to we the north. They took control of the reduced as well as discount rate valued market.
Shops like Sears Canada as well as Hudson’s Bay, reacted by going towards a medium to higher-priced service version. At some point, over years, that business was “picked off” by specialized merchants.
Sears Canada after that missed its possibility to become an on the internet company. It should have known that it had to take on the likes of Amazon. E-commerce sites have created the death of lots of traditional sellers, like Sears.
Sears Canada closing down: Sears Holdings senior management
The C suite in both Canada as well as the United States has had a revolving door on it for several years. No person has existed enough time for Sears to carry out a well-planned and implemented survival strategy as the markets changed.
Sears in the United States, and for that reason Sears Canada, is managed by hedge fund manager Edward Lampert. In real hedge fund design, Sears Holdings as well as Sears Canada has sold off assets to raise cash for many years. It has cannibalized itself.
Sears Canada closing down: My personal assessment
In my viewpoint, Sears Holdings as well as Sears Canada are as good as finished. It is just currently an issue of time before the last pieces are marketed and sold.
Sears Canada has currently employed BMO Capital Markets to discover sale alternatives. It has also retained law firm Osler, Hoskin & Harcourt LLP for legal guidance. My hunch is that Sears Canada this year will certainly be put under court protection from creditors. Assets representing a business unit that can be sold off will be. The rest will be liquidated.
This is already a familiar tale for Canadians; Target Canada comes to mind. You can revisit its liquidation story in our previous blogs:
- TARGET CANADA CLOSING: $5.4 BILLION AND COUNTING
- Target Canada owes more than $5-billion to creditors
- TARGET CANADA SEEKS COURT APPROVAL FOR LIQUIDATION
- TARGET CANADA LIQUIDATION BEGINS FEBRUARY 5; ATTENTION TARGET CANADA SHOPPERS
Sears Canada closing down: What about you and your company?
You or your business possibly does not have any kind of other assets to offer to raise cash. Even if you did, the Sears Canada tale reveals that over time, it does not work out. What every person and business needs is a proven strategy and a plan to go forward with.
If you have too much debt and insufficient cash flow, you need your plan and strategy in place NOW. Contact us now. The Ira Smith Team is here to solve your debt problems and help you carry out that winning strategy, no matter the reason. We’re here to help and get you back on solid financial footing Starting Over, Starting Now. We’re just a phone call away.
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