The retailer applied for protection through Canada’s Companies Creditors Arrangement Act in the Ontario Superior Court of Justice, a commercial court in Canada, after intense speculation that such a filing was imminent.
Shares of the company, which was separated from Sears Holdings Corp. in 2014 but still counts Sears chairman and chief executive officer Edward Lampert as its majority shareholder, were down 22.5 percent to 62 Canadian cents in the Toronto market.
Although the move is akin to a bankruptcy filing in the U.S., Sears Canada said its ongoing “reinvention plan” – focused on brand positioning, new assortments and a better customer experience – has been “gaining traction with customers.”
“The brand reinvention work Sears Canada has begun requires a long-term effort, but 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,” the company said. “If granted, the Sears Canada Group will work to complete its restructuring in a timely fashion and hopes to exit CCAA protection as soon as possible in 2017, better positioned to capitalize on the opportunities that exist in the Canadian retail marketplace.”
Sears Canada posted a first quarter loss of 144.4 million Canadian dollars, up from 63.6 million Canadian dollars a year earlier. Revenues fell 15.2 percent to 505.5 million Canadian dollars, although same-store sales increased 2.9 percent.
That increase in same-store sales is being taken by Sears Canada as proof that its “new brand positioning is starting to resonate with customers.”
The retailer earlier this month warned of its ability to continue operating as a going concern, pointing out that it has incurred steady operational losses over the last five fiscal years. Sears Canada also revealed it was laying off 400 workers, including certain executives.
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