Sears Canada is for sale to not just the highest bidder, but things are so bad, it may go to any bidder going forward. That is the only good news to report for the struggling retailer. The bad news is Sears Canada Inc. posted its steepest fall in quarterly sales in almost five years, denting the struggling department store chain's turnaround efforts, as its first-quarter net loss more than doubled, reported Reuters.
Sales fell 11 percent, and same store sales dropped 7.6 percent. It gets worse. Sears Canada's shares were little changed, but shares of its parent company, Sears Holdings Corp, which said last week it was looking to sell its 51 percent stake in Sears Canada, fell as much as 4.7 percent. Sears Canada is blaming it on the weather, as a prolonged winter in the country spelled deep losses.
Sale of spring merchandise items didn't go so well, in another weather-related event.
"Sales of spring merchandise were below last year, as winter-like weather was prevalent in most parts of the country well into the new season, with cooler temperatures and significantly more snow in many areas," CEO Douglas Campbell said in a statement.
Sears Holding Corp., in desperate need of cash, recently raised cash more than $500 million from its spinoff of Lands' End, receiving the cash in dividend form prior to the spinoff. The cash it raised from Lands' End was not enough and the parent company said it is contemplating the sale of Sears Canada Inc., according to the Globe and Mail of Canada.
The earnings report is not helpful. Sears Holding had hoped that the sale would do two things: raise cash and stop some of the bleeding of cash from the Canadian retailer. Credit Suisse analysts said recently that there was little "meat left on the bones" of Sears Canada:
We find the timing of this spin-off interesting, as Sears Canada last year sold seven of its trophy properties, but arranged to continue to operate them through the beginning of 2014. We wonder how much of the significantly diminished Adjusted EBITDA last year came from those seven properties…
[Sears Canada is also] seeing or about to see a wave of fresh competition from Wal-Mart Stores (WMT) and Target’s (TGT) recent northern expansions to Nordstrom’s (JWN) upcoming launch. The company still operates 24.8 million square feet of retail space, but only 14 full-line department stores are company-owned and as we mentioned above, much of the best real estate has been sold. Yes, Sears Canada has a net cash position, but we expect Sears Holdings to take as much cash as they can beforehand in the event of any sale or spin-off.
Former Sears executive Steven Dennis recently suggested that Sears Holdings liquidate itself and said that the company should "stop the charade and embrace the inevitable."
Sears Canada, which traces its Canadian roots back to the early 1950s, has fallen on hard times in recent years as it lost market share to U.S. rivals such as Wal-Mart Stores Inc. and Target Corp, who have been aggressively expanding in the country. Target, itself grappling with mounting losses in Canada, on Wednesday cut its full-year sales forecast for the country, a day after firing the president of its Canadian operation.
Sears Canada has eliminated some 3,000 positions since November, sold several of its most valuable leases over the past year and closed several stores last year as it tries to navigate a turnaround.
The company said on Wednesday same-store sales fell 7.6 percent, while total revenue fell 11 percent to C$771.7 million ($705.8 million) in the quarter. This was the steepest fall in sales after a 12 percent fall in the second quarter of fiscal 2010. Sears Canada's net loss widened to C$75.2 million, or 74 Canadian cents per share, from C$31.2 million, or 31 Canadian cents per share, a year earlier.
The company's shares were marginally lower at C$15.23 in afternoon trading on Toronto Stock Exchange.
This bad news just adds to Sears Holdings woes.
Reuters - UPDATE 2-Sears Canada posts steepest fall in sales in five years