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Shares in Sears Canada were halted Thursday morning after the retailer applied for and was granted protection from its creditors under the Companies’ Creditors Arrangement Act — the law that covers insolvency proceedings.
The move gives the retailer 30 days to restructure itself, which includes $ 450 million in debtor-in-possession financing to fund the company while it restructures, a process that will include closing dozens of locations and laying off thousands of workers.
The chain will axe 20 full Sears stores, 15 Sears Home Stores, all 10 outlet stores and 14 Sears Hometown stores — roughly one-third of its current retail footprint.
Affected locations are listed here:
|Sears stores||Sears Hometown stores||Outlet stores||Sears Home stores|
|Medicine Hat, Alta.||Cold Lake, Alta.||Abbotsford Retail, B.C.||Calgary|
|Grande Prairie, Alta.||St. Albert, Alta.||Winnipeg Garden City||Edmonton Skyview|
|Lloydminster, Alta.||Okotoks, Alta.||Halifax Outlet||Ancaster, Ont.|
|Red Deer Relocation, Alta.||Spruce Grove, Alta.||Cornwall, Ont.||Woodbridge, Ont.|
|Kamloops Aberdeen Mall, B.C.||Ft. McMurray, Alta.||Chatham, Ont.||London, Ont.|
|Bathurst, N.B.||Leduc, Alta.||Cambridge, Ont.||Scarborough, Ont.|
|Saint John, N.B.||Sherwood Park, Alta.||Timmins, Ont.||Kingston, Ont.|
|Corner Brook, N.L.||Creston, B.C.||St. Eustache, Que.||Ottawa East|
|Truro Mall, N.S.||Sechelt, B.C.||Montreal Place Vertu||Sudbury, Ont.|
|Dartmouth, N.S.||Grand Forks, B.C.||Sorel, Que.||Windsor, Ont.|
|Brockville, Ont.||Orangeville, Ont.||Orillia, Ont.|
|Sault Ste. Marie, Ont.||Rimouski, Que.||St. Bruno, Que.|
|Hull, Que.||Rouyn-Noranda, Que.||Laval, Que.|
|Chicoutimi, Que.||Melville, Sask.||Quebec City|
|St. Georges de Beauce, Que.||Ste. Foy, Que.|
|Moose Jaw, Sask.|
|Prince Albert, Sask.|
All other Sears locations will remain open, the chain said, and the company “plans to continue to operate a large number of stores, continue to maintain significant employment, and to service its customers across Canada,” Sears said in a court filing.
About 500 office positions at the company were to be eliminated immediately. The remainder of the job losses will come as Sears closes stores. As of May 30, the company employed approximately 17,000 people, with 10,500 in part-time positions and the rest working full-time.
As a result of the CCAA proceedings, Sears Canada’s shares will eventually be delisted from the TSX.
The company has seen a huge drop in its revenues compared to several years ago, waylaid by a changing retail landscape and tougher online competition. About a year and a half ago, the company revamped its operations and the early indications are that Sears has made progress since then, with same-store sales growth for two quarters in a row.
That’s an encouraging sign for the chain, but Thursday’s move signals that the company thinks more drastic changes are needed.
“The continued liquidity pressures facing the company as well as legacy components of its business are preventing it from making further progress and from restructuring its legacy assets and businesses outside of a CCAA proceeding,” Sears said.
The causes of Sears’ problems are complex, but there is one big threat that has hit many retailers of late: “One word — e-commerce,” said Mirella Pisciuneri, a partner at Richter consultancy, who isn’t working on Sears’ restructuring but has handled similar ones in the past.
The rise of online selling has squeezed Sears and many other retailers, as customers can now comparison shop online and online sellers have much lower costs. It is somewhat ironic that online selling is such a major threat for Sears today, considering how the chain got its start.
Parent company Sears Roebuck & Co. set up shop in Canada in 1952 and was predominantly a seller of merchandise by mail, via the company’s popular catalogue.
“Who is Sears right now?” she said. “Why go to Sears?”
Sears says it’s doing exactly that, with its relaunch in late 2015 showing early indications of slumping sales turning around ever so slightly.