Two Ottawa-area Sears stores to close as retailer shuts 59 locations across Canada

Struggling department store chain secures creditor protection, cuts 2,900 jobs
Sears

Sears Canada (TSX:SCC) said it plans to close 59 locations, including two in the National Capital Region, and cut about 2,900 jobs under a court-supervised restructuring after it was granted protection from creditors Thursday.

The announcement came after the company was granted temporary protection from creditors under the Companies' Creditors Arrangement Act (CCAA) by the Ontario Superior Court of Justice.

The company plans to continue operating throughout the restructuring and said it intends to emerge as a leaner, more focused operation better able to compete in the hyper-competitive retail industry.

"However, to achieve that goal and to right-size its business, the Sears Canada Group anticipates that a number of stores will have to be closed, operating costs reduced, business lines exited, and head count reductions implemented," Sears Canada said in documents filed with the court.

The 30-day court protection from creditors will give it some "breathing space" as it tries to revamp its business, the retailer said. The court also authorized Sears Canada to obtain up to $450 million in financing to maintain operations.

Under the court-supervised plan, Sears Canada will close 20 full-line department stores, 15 Sears Home stores, 14 Sears Hometown locations and all 10 of its Sears Outlet stores. Its department stores range from 30,000 to 300,000 square feet, with many serving as shopping hubs in small towns throughout the country.

About 500 office positions will be eliminated immediately, with the rest of the job losses coming as the stores begin to close. As of May 30, Sears Canada employed approximately 17,000 people, with 10,500 in part-time positions and the rest working full-time.

The closures include two in the Ottawa area — the east Ottawa Sears Home store on Innes Road and the full-line department store at les Galeries de Hull in Gatineau. About 300 jobs at those locations will disappear.

Like many other mid-range retailers, Sears has seen its revenues plummet in recent years. In a media release Thursday, the chain said it has "redefined its brand positioning, revamped its product assortment and rebooted its customer experience and service standards" over the past 18 months, but apparently not fast enough to stem the need for closures.  

Ottawa retail analyst Barry Nabatian said the company has been losing market share to more upscale competitors such as Quebec-based Simons and U.S. chain Nordstrom, both of which have locations at the Rideau Centre in Ottawa, as well as big-box stores such as Wal-Mart that offer similar styles of clothing at cheaper prices.

"Basically, the middle has been under assault for the last 15 years and it’s just getting worse," said Mr. Nabatian, a director at consulting firm Shore-Tanner & Associates. "The main reason is that people have many, many more choices in terms of atmosphere, advertising, promotion. They are much more up-to-date and effective than what Sears has been doing."

He said Sears failed to keep up with the times, leaving many of its stores with outdated decor and a tired feel that had little appeal to younger generations of shoppers.

"You walk into Simons department store, you really want to spend money. You don’t want to leave because it’s so bright, it’s nice, it’s attractive. Sears, for millennials, it’s their father’s store, it’s not their store. To (Sears') credit, they really have tried hard (recently), but sometimes timing is not on your side.”

Mr. Nabatian added the impact of e-commerce on retailers such as Sears has been "overblown" by some analysts. Canadians still do more than 90 per cent of their buying at brick-and-mortar locations, he said, with many consumers preferring to do their research online before making their purchases in store.

Mark Cohen, who was the company's CEO and chairman before he was ousted in 2004, said its problems have been self-inflicted and he believes it has no vision for the future.

"This notion that they'll come out a stronger, better company is a fantasy because they don't have a stronger, better strategy," said Mr. Cohen, who is currently the director of retail studies at Columbia University Graduate School of Business in New York.

"You clean up your balance sheet, but then what?"

Headquartered in Toronto, Sears Canada has 94 department stores, 23 Sears Home stores and 10 outlets. It said it hopes to exit court protection as soon as possible this year.

— With additional reporting by David Sali