Sears Canada reportedly bound for liquidation
- Sears Canada is preparing to file for creditor protection in court and will likely end up liquidating, Bloomberg reported Tuesday, citing unnamed sources.
- The business is expected to be sold off piecemeal, including real estate that spans many lower-end malls and likely will be sold to multiple buyers, according to Bloomberg. A spokesperson for Sears Canada did not reply to a request for comment from Retail Dive.
- Sears Canada — which is no longer affiliated with Sears Holdings since a controlling stake was sold in 2014 to Sears CEO Eddie Lampert's hedge fund — last week warned investors about its prospects as a going concern and was reportedly looking for a buyer.
Sears Canada, like its namesake and former parent Sears Holding Corp., issued “going concern” language in a release this year. For the northern counterpart to Sears, the week between going concern language and reports of impending bankruptcy was a lightening flash compared to Sears Holding’s slow-motion crisis.
After five years of operating losses and negative cash flow, the Canadian retailer 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.” Prompting the statement were negotiations with lenders for a liquidity injection that fell short of Sears Canada’s needs.
While Sears Canada today operates separately from its former parent, it is still heavily connected to the man who runs Sears. Lampert and his hedge fund, ESL Investments, own 45% of Sears Canada and Lampert’s Sears owns another nearly 12% of the Canadian retailer.
Sears Holdings is facing a well-publicized financial crisis of its own, though it has so far managed to stave off bankruptcy. The company reported in its most recent quarterly statement that it managed to eke out a profit after a long string of losses, but it still faces long-term liquidity challenges. Ratings firms Moody’s and Fitch both see relatively high default risk in Sears despite emergency loans from Lampert and ESL and the many waves of store closures and corporate cost cuts in recent years.
For the year so far, Sears Holdings plans to close upwards of 250 stores and will lay off more than 500 corporate employees. These moves follow massive asset sales, including its treasured Craftsman Brand to Black and Decker and hundreds of owned real estate properties to a venture chaired and partially owned by Lampert.
“It’s only a matter of time before the lights go out,” Ken Perkins, president of retail research firm Retail Metrics Inc., said in an earlier interview with Retail Dive. “There really isn’t a way forward. … I don’t see how it can possibly survive long-term.”
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