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.

Just Posted

10 tonnes of plastic cleared from North Coast beaches

Living Oceans Society spent three days sorting the marine debris

Court orders protestors to leave fish farm site

“The adjournment allows us to compile our evidence and present it in 30 days.”

NISS Students find out what journalism is all about

Four students visit the Gazette for a work experience

Disability Tax Credits in jeopardy for Type 1 diabetics

“It’s something I deal with every day of my life.”

Port Hardy Residents still waiting for Telus Fibre Optic

Mansourati was unable to say who Telus would be contracting to finish the ninth fibre serving area.

VIDEO: Rare comic showing Superman’s 1st appearance to be auctioned

The 1938 comic features Superman hoisting a car over his head

Lights to turn blue ahead of funeral for fallen Abbotsford police officer

Buildings across B.C. are going blue Saturday night in honour of Const. John Davidson

Ride-share pioneer drives up quietly

Lyft approaches B.C. without Uber bombast

VIDEO: Rare comic showing Superman’s 1st appearance to be auctioned

The 1938 comic features Superman hoisting a car over his head

Pine beetles from Jasper National Park moving into commercial forest

In 2014, beetle activity went from a few spots around Jasper’s townsite to rampant

VIDEO: Tragically Hip members, Alex Trebek receive Order of Canada

Newest recipients join 6,897 Canadians such as Christine Sinclair, Graham Greene and Mark Messier

AC/DC’s Malcolm Young dies at 64

‘Malcolm was a songwriter, guitarist, performer, producer and visionary who inspired many.’

‘I will now live in consistent fear’: Allan Schoenborn granted escorted leaves

The Merritt man was deemed not criminally responsible in the killing of his three children in 2008

INTERACTIVE MAP: Follow the 2017 Tour de Rock

Follow the Tour de Rock, as they pedal more than 1,000 kilometres fundraising to combat paediatric cancer

Most Read