Sears Canada enters bankruptcy protection
Sears Canada has filed for creditor protection – but says it will emerge as a going concern after a restructure.
According to a press statement, Sears Canada will receive US$340.1 million in financing from Wells Fargo Capital Finance Corporation and GACP Finance. The funds will be used to close 59 of its 225 stores, including 20 full-scale outlets, 15 Sears Home stores, 10 Sears Outlets and 14 Sears Hometowns. It will cut 2900 of its 17,000 staff positions in shops and at its Toronto head office.
Sears Canada split from its beleaguered US namesake in 2014, but Sears Holdings (US) CEO Eddie Lampert and his hedge fund own 45 per cent of the company and Sears Holdings another 12 per cent.
The statement said the restructure would leave Sears Canada “better positioned to capitalise on the opportunities that exist in the Canadian retail marketplace”.
Analysts have taken a positive view to the bankruptcy protection move.
“Sears Canada, for now, has a future,” wrote one in the US. “Its creditor protection plans are designed to leave the company as an operating retailer, after initial reports pointed toward a liquidation of the business, with its parts and assets being sold off piecemeal.”
Indeed, same-store sales have risen in the past two quarters and over the last 18 months, Sears Canada has “rebuilt its front and back-end technology platform, redefined its brand positioning, revamped its product assortment, and rebooted its customer experience and service standards”.
However five years of operating losses and a high debt burden had hampered the turnaround effort and threatened its future.