The Sears retail brand is suffering from Toronto to Hoffman Estates, Ill.
This story first appeared in the June 14, 2017 issue of WWD. Subscribe Today.
Sears Canada Inc., which was separated from the struggling U.S.-based Sears Holdings Corp. in 2014, raised doubts about its ability to continue as a going concern and opened up the possibility that it would sell itself.
In the U.S., Sears Holdings said it was laying off 400 workers including its president of apparel, David Pastrana. A spokesman said information on who would run apparel at the retailer following his departure was not yet available.
Also leaving are president of online Stephan Zoll and senior vice president of the Shop Your Way membership program, Eric Jaffe.
Shares of Sears Canada dropped 23.7 percent to 0.87 Canadian dollars, while Sears Holdings stock declined 2.6 percent to $6.85.
Both companies have been trying to adjust to the dramatic changes sweeping through retail with consumers spending less at stores while shopping online or preferring to spend on experiences.
Edward S. Lampert, chairman and chief executive officer of Sears Holdings, sent an e-mail to employees explaining that the workforce reduction was tied to broader efforts to remake the business.
“These organizational changes are in addition to the store closures we initiated last week as we continue to right-size our store footprint and inventory needs in preparation for the upcoming holiday season,” Lampert said. “Together, these restructuring actions will bring us very close to our goal of achieving $1.25 billion in cost savings by the end of the fiscal year — one of the critical steps we are taking to improve our operational performance.
“While we will continue to take all necessary steps to return to profitability, we want to emphasize that our integrated retail strategy will remain driven in part by our brick-and-mortar locations,” he said. “To be clear, our company is continuing to fight to become a more competitive and agile retailer.”
The U.S. firm has been struggling mightily and in March warned that it had its own “going concern” doubts.
The picture is much the same north of the border.
Sears Canada on Tuesday said it “continues to face a very challenging environment with recurring operating losses and negative cash flows from operating activities in the last five fiscal years, with net losses beginning in 2014.”
“While the company’s plans have demonstrated early successes, notably in same-store sales, the ability of the company to continue as a going concern is dependent on the company’s ability to obtain additional sources of liquidity in order to implement its business plan,” Sears Canada said.
Management determined that the 164.4 million Canadian dollars in cash it has on hand as well as projected cash flow from operations would not be “sufficient to meet obligations coming due over the next 12 months.”
The company said it recently started a process to address its “liquidity situation” and was looking at “strategic alternatives to continue to finance its business” including a financial restructuring or sale.
A special committee of the board has been established to help with the process and BMO Capital Markets has been retained as a financial adviser.
Sears Canada postponed its annual meeting scheduled for Wednesday.
The company also reported its first-quarter net losses widened to 144.4 million Canadian dollars 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.