FILE - In this Wednesday, Feb. 8, 2017, file photo, shoppers walk into a Sears store in Pittsburgh. Sears said that there is “substantial doubt” that it will be able to remain in business. The company, which runs Kmart and its namesake stores, has struggled for years with weak sales. (AP Photo/Gene J. Puskar, File)

Sears Canada ponders sale, says there is ‘significant doubt’ about its future

Despite its recent efforts to turn itself around, the writing has been on the wall for Sears Canada

Sears Canada, known for its catalogues that were a household staple for generations, said Tuesday there is “significant doubt” about its future and it could sell or restructure itself.

The struggling retailer, which tried to reinvent itself last year with a new corporate logo, said it doesn’t expect to have enough cash flow over the next 12 months to meet its obligations. It’s the latest sign of how the retail sector is being upended by numerous factors, including the rise of online shopping.

“The company 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,” Sears Canada (TSX:SCC) said in a statement.

“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.”

Its shares tanked, down 22 per cent to 89 cents in midday trading on the Toronto Stock Exchange.

In a retail world dominated by the likes of Amazon, Sears Canada has floundered, a relic of a bygone shopping era where the department store was king.

The company’s executive leadership has been a veritable revolving door, having gone through several changes over the last four years.

Despite its recent efforts to turn itself around, the writing has been on the wall for Sears Canada for about a decade, said Mandeep Malik, an assistant professor at the DeGroote School of Business at McMaster University.

“It was a too-little, too-late kind of story,” he said.

Malik said Sears Canada has failed to meet customer expectations when it comes to service, choice and price, and it now finds itself trying to play catch-up in a hyper-competitive marketplace. Its decline is symptomatic of a broader trend in retail, he added.

“The mid-line department stores are getting squeezed out.”

Last week, rival Hudson’s Bay Co. (TSX:HBC) said it is cutting about 2,000 jobs across North America in an effort to help it compete in an increasingly tough retail environment, partly due to the rise of e-commerce.

Sears Canada’s announcement came as it reported a first-quarter loss of $144.4 million, more than double what it was a year ago. Its revenue slipped by about $90 million to $505.5 million, a decline of 15.2 per cent.

The company said it had expected to be able to borrow $175 million for additional liquidity, but that has been reduced to about $109 million. It said it also lacks other assets, such as real estate, that can be monetized in a timely manner.

“Accordingly, such conditions raise significant doubt as to the company’s ability to continue as a going concern,” it said.

Spokesman Vincent Power said in an email it’s not clear yet whether there will be any layoffs at the company, which had about 16,000 employees as of the quarter ending April 29.

Still, Sears Canada maintained some positivity about its outlook, pointing to a 2.9 per cent increase in same-store sales, a key metric in retail that measures sales at locations open for at least a year. That came, however, as the number of its stores dropped. Sears Canada has 94 department stores, 23 Sears Home stores and 10 outlets.

The department store chain also postponed its annual meeting, which had been scheduled for Wednesday, until an unspecified date.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Lumby Lions name Good Citizen of the Year

Award goes to Lumby Food Bank operator and North Okanagan Valley Gleaners volunteer Robert Wilkinson

North Okanagan sisters-in-law sleep out successful

Kiley Routley and Heidi Routley raise nearly $2,400 and awareness for youth homelessness

Vernon youth questioned by RCMP after incident on school roof

Police receive reports of debris being thrown from Seaton Secondary roof Saturday

Vernon restaurant winging it with colour

Wings hosts colouring contests where child patrons can win gift certificates

QUIZ: Are you ready for a summer road trip?

How much do you really know about roads, motor vehicles and car culture? Take this quiz to find out.

Islanders want BC Ferries to follow order that lets residents board before tourists

For ferry-dependent communities, ferries are often the sole practical lifeline to work, school or medical appointments.

Beverly Hills 90210 star’s family selling Vancouver Island Beach Resort

You can own Jason Priestley’s Terrace Beach Resort in Ucluelet for less than $5 million

Genetic detectives begin work to trace spread of COVID-19 in Canada

The kinds of genetic technology being used for this project did not exist when SARS hit Canada in 2003

Sports fishers protest Fraser River Chinook closures

Public Fishery Alliance wants hatchery fish open for harvest

Dozens of fish die at popular lake near Chase

A few natural phenomena are possible causes for their deaths.

Amber Alert for two Quebec girls cancelled after bodies found

Romy Carpentier, 6, Norah Carpentier, 11, and their father, Martin Carpentier, missing since Wednesday

B.C. man prepares to be first to receive double-hand transplant in Canada

After the surgery, transplant patients face a long recovery

Most Read