Sears Canada set to liquidate after 65 years

December 2017 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

December 2017 Issue

Bringing to an end over 60 years of retail trading, Sears Canada Inc., and certain of its subsidiaries, has been granted approval to liquidate all of its remaining stores – 74 department stores and eight Sears home stores – and assets, having failed to find a buyer that would allow it to continue.

Approved by the Ontario Superior Court of Justice, which has extended creditor protection for Sears until 22 January 2018, the liquidation and wind-down of the business means the immediate loss of thousands of jobs. “The company has approximately 12,000 employees, three-quarters of whom are part-time,” said Sears Canada spokesman Joel Shaffer. “Of the approximate 800 employees in Sears Canada’s head office, the vast majority will exit immediately.”

Burdened with major debt, the beleaguered retailer had been operating under the Companies’ Creditors Arrangement Act (CCAA) since June 2017 – an arrangement which included cutting 2900 jobs and closing roughly a quarter of its stores. It subsequently received the court’s approval of a sale and investment solicitation process (SISP) to seek out proposals for the acquisition of, or investment in, the Sears Canada Group’s business, assets and/or leases, and to implement one or a combination of proposals.

An independent Canadian digital and store-based retailer headquartered in Toronto, Sears Canada operated as a separate entity from its US-based co-founder (Sears Holdings Corp). Attempts had been made over the past 18 months to restructure and reduce the company’s product assortment to have a larger focus on fashion and home decor, downplaying its automotive, electronics and tool businesses. Sears stated that its new strategies and positioning were “starting to resonate with consumers”, citing increasing same-store sales.

Unfortunately, this restructuring plan did not, as it turned out, gain sufficient traction for the company to avoid liquidation. “Despite the outstanding efforts of dedicated associates across the company, Sears Canada does not have the financial resources to provide it with the time necessary to complete its reinvention,” said Mr Shaffer.

According to Reuters, this failure left the company with over C$1.1bn ($879m) in liabilities, a total almost commensurate with its assets, and falling sales every quarter since it was spun off from Sears Holdings Corp in 2012. Furthermore, in light of the liquidation, Brandon G. Stranzl resigned his position as executive chairman on Sears Canada’s board of directors. A group led by Mr Stranzl had made a bid to buy the business but, after what the retailer described as “exhaustive efforts”, no agreement could be reached.

“Sears Canada thanks its customers for their loyalty and support since 1953, when it began serving Canadians coast to coast under its then corporate name, Simpsons-Sears Ltd,” said Sears on its website. “Sears also extends heartfelt thanks to its associates, both current and former, who helped build the company into what was, for much of its existence, Canada’s number one retailer, providing great value through quality products, exceptional services and outstanding prices.”

Following the approval of the liquidation, a joint venture (JV) group – consisting of Hilco Global (through its Canadian division, Merchant Retail Solutions, ULC), Gordon Brothers, Tiger Capital Group and Great American Group – announced that liquidation sales would begin no later than 19 October and would continue for 10 to 14 weeks (scheduled to end on 21 January 2018 when all Sears stores will close). “We encourage consumers to shop early to take advantage of the best selection of products and great savings available throughout the stores while supplies last,” said a spokesperson for the JV group.

Reflecting on the liquidation and the end of decades of trading, Sears Canada said in the statement that it “deeply regrets the outcome and the resulting loss of jobs and store closures”.

Fraser Tennant