Dive Brief:
- The effort to save Sears Canada's operations has failed. On Tuesday the Canadian department store chain said it would seek court approval to liquidate all of its remaining stores and assets, according to a company press release.
- The company said it expects the court overseeing the bankruptcy to hear a motion around the liquidation plan on Friday. Liquidation sales of store inventory will likely begin no earlier than Oct. 19 and would take 10 to 14 weeks, according to the retailer.
- The decision to shutter operations follows a last-minute buyout bid organized by Sears Canada's top executive with the backing of private equity partners. However, as the retailer said in a statement, "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." As a result — and with the recommendation of its court-appointed bankruptcy monitor, FTI Consulting — the company decided to wind down the business.
Dive Insight:
And so marks the end of Sears in Canada.
Until 2014, the retailer was operated by its namesake Sears Holdings Corp., which still owned a 12% stake in the company. ESL Investments, the hedge fund controlled by Sears CEO Eddie Lampert, owned another 45% of Sears Canada. Throughout the summer Lampert had shown interest in buying the retailer out of bankruptcy together with another major investor, Fairholme Capital Management, which owned another 20.8% of Sears Canada.
Negotiations fell through, though, leaving Sears Canada Executive Chairman Brandon Stranzl trying to lash together his own deal to save the company and jobs of its 12,000 workers. That bid, apparently, failed too.
After five years of operating losses and negative cash flow, Sears Canada said in a June 13 release that "cash and forecasted cash flows from operations are not expected to be sufficient to meet obligations coming due over the next 12 months." It filed for creditor protection later in June with immediate plans to close 60 stores but restructure and continue as an operating retailer.
Despite the sales losses, there were still Canadian customers who were loyal to the Sears brand and were shopping at its stores. Some of those customers told the Toronto Star they were "disappointed" and "devastated" at the retailer's demise.
Those with businesses that depended on Sears Canada as a mall anchor or operated add-on businesses within its stores were also dismayed. Shaukat Hussain, a watch repair licensee for Sears, told the Star his income was now in jeopardy. "There's a tradition for customers of going to Sears to have their watches fixed and (the brand) Sears gives them extra trust and confidence in my service," Hussain said to the Star. "It's sad what's happening. My customers say, 'What will we do without Sears?'"
While operated separately from Sears Holdings, Sears Canada had a close financial relationship with Lampert through his and Sears' stakes in the Canadian retailer. Some investors and other observers have been watching the Sears Canada bankruptcy closely for signs of how Lampert might ultimately handle Sears Holdings' well-documented financial struggles
