Sears Canada Liquidating After Failing to Find Investor
The Canadian retailer broke off from Sears Holdings five years ago, but Edward S. Lampert is still its biggest stakeholder.
Sears Canada is planning to liquidate after efforts to reorganize its struggling business failed.
The retailer, which broke off in 2012 from former U.S. parent Sears Holdings, said it will be asking Canada’s Superior Court of Justice in Ontario for permission to liquidate “all of its remaining stores and assets,” and the request is expected to be approved on Friday.
Store closing sales are set to begin Oct. 19 and continue for no more than 14 weeks. Sears Canada operates 195 Sears locations, along with another 269 hometown dealer stores. It employs over 11,200 workers.
“Further details regarding the liquidation will be communicated in due course,” the retailer said.
The company added that it “deeply regrets” having to liquidate “and the resulting loss of jobs and store closures.”
Although Sears Canada and Sears in the U.S. operate separately, Sears Holdings still has a 11.7 percent stake in the Canadian operation, while chairman and chief executive officer Edward S. Lampert has a 45 percent stake through his hedge fund, ESL Investments Inc.
Sears Canada in June sought protection from creditors with a Companies’ Creditors Arrangement Act filing, akin to a Chapter 11 bankruptcy filing in the U.S.
At the time of the filing, Sears Canada said its “reinvention plan” — including changes to brand positioning, new assortments and a better customer experience to stem years of losses — was ongoing and had even been “gaining traction.” The retailer said it hoped to exit the CCAA process this year as a smaller and fully operational company.
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. It was this small uptick in sales that led the company to believe its reinvention was paying off.
But it seems that the prospect of continuation hung on an acquisition or outside investment. While Lampert’s ESL and another hedge fund, Fairholme Funds Inc., which holds a 20.7 percent stake in Sears Canada, showed interest, that deal fell through and there was apparently no other to be had.
“Sears Canada received and implemented going concern transactions for various lines of business, but following exhaustive efforts, no viable transaction for the company to continue as a going concern was received,” the company said.
The Sears Canada bankruptcy at the time of filing was seen a possible harbinger for Sears Holdings, which has been struggling financially for some time.
The U.S. retailer just last week received a $100 million loan from Lampert through ESL (the source of many cash infusions over recent years) to get it through the holiday season.
Sears has also recently closed 150 stores on top of hundreds more closures over the last decade.