BUSINESS

Shares in Sears Canada drop a day after parent company announces U.S. closures

12/28/2011 10:28 EST | Updated 02/27/2012 05:12 EST
Sears Canada isn't looking to close stores but instead wants to improve the ones it has, the department store operator said Wednesday, a day after its American parent announced the shutdown of scores of locations.

Shares in Sears Canada Inc. closed down 10 per cent Wednesday, a day after Sears Holdings Inc. (NASDAQ:SHLD) said it would close between 100 and 120 Sears and Kmart stores in the United States.

The closures do not apply to Sears Canada Inc., the U.S. retailer's Toronto-based subsidiary, which has been streamlining itself under a new leadership team to help reverse recent losses.

"We're not in a position where we're closing stores," said Sears Canada spokesman Vincent Power.

"If anything, we're looking on how to improve them."

Power said he isn't aware of any more job cuts at Sears Canada stores and added that it is too soon to comment on how the chain's sales fared during the holiday shopping season.

Sears Canada (TSX:SCC) shares closed down $1.16 at $10.40 Wednesday on the Toronto Stock Exchange.

Last month, Sears Canada laid off about 70 employees at its head office in downtown Toronto as the retailer works to overcome a loss of nearly $47 million in its latest quarter.

"Our new CEO, Calvin McDonald, has been putting plans into place to make the stores even more attractive, more relevant, more shopable for Canadian consumers," said Power.

McDonald found that Sears' stores were difficult to shop in and there was "too much clutter," so the stores were "cleaned up" for the back-to-school season, Power said from Toronto. "Certainly, he sees a lot more potential for the stores."

The stores will be refreshed and some will be selected for more significant changes, Power said, adding that Sears' flyers have also been made easier for customers to read.

"Our goal is to be a complete shopping experience for customers."

But retail analyst John Winter said Sears probably should consider the future of its underperforming stores in Canada.

"The question is really, why don't they close a few stores in Canada?" said Winter, of John Winter Associates in Toronto.

"There's always stores that should never have been opened and where the market has moved away," Winter said.

"Most retailers should be looking at the bottom end of the bell curve to see which ones are not performing up to their standards and see if they can close them down and that is certainly a boost to the bottom line, immediately."

Sears also has to be a bit more price conscious to better compete with other retailers such as Walmart, he said.

Between lower-end Walmart and Target, which will enter the Canadian market in 2013, Sears department stores can find their place by appealing to the middle class.

"There is a space between Walmart, which is basic necessities, and The Bay. There is a space in there that they can fill and they should be filling pretty well," Winter said of Sears.

"The problem is Target is coming in and Target is a step above Walmart in quality and in price. It will be competing, perhaps, with the lower end of the Sears' line."

The retail chain should also consider slimming down its catalogue further, which needs an "important rethink", he said, especially with shoppers comparing prices online.

Winter said he also isn't sure that McDonald, appointed last June, will be able to turn Sears Canada around. McDonald is a former executive from Loblaw Companies (TSX:L).

"What does he know of fashion?"

But Power said McDonald has a retail background.

"Retail is retail and there are principles about giving a compelling shopping experience to customers that a retailer of any line of merchandise would be able to benefit from and make use of."

At Sears Canada, the company has said its recent job losses affected some middle and senior management. In total, the company has more than 30,000 employees, of which about one-third are full-time staff.