Slipping sales during the holiday season — a time where retailers typically earn up to 40 per cent of their annual revenue — has cast a shadow of doubt on the future of Sears Canada reports the CBC.
According to a release by the Sears Holding Corporation, Sears Canada's parent company, same-store-sales fell by 5.8 per cent for the Canadian retailer in the nine weeks ending on Dec. 29. Same-store-sales are considered a strong indicator of a retailer's growth by comparing the difference in revenue outlets make over the same time period. Sears Holding attributes the poor sales "primarily to a decline in electronics, as well as the impacts of unseasonably warm temperatures in most parts of Canada," as noted in the company's release. Fourth quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are also expected to fall too half of last year's $97-million.
In an interview with the Toronto Star, Sears' CEO says that while sales in electronics fell, the company made gains in other areas.
“On the positive, our apparel and accessories was positive in December, well above trend for us,” said Sears CEO Calvin McDonald, adding that consumer confidence and the cool housing market played a role in the consumers purchasing major appliances and mattresses.
The loss comes at a time as Sharon Driscoll, the company's chief financial officer, abruptly left the company to pursue other interests. Meanwhile, Sears Canada has been abandoning ailing store outlets and selling back leases to landlords in order to make way for new retailers like Nordstrom. It's a move which some analysts has caused a battle between Sears and Target, a U.S. retailer set to arrive in Canada this year.
"Calvin McDonald has been moving Sears to a more contemporary image in Canada that is head-on with Target,” said Wendy Evans, president of retail consultancy at Evans & Co. Consultants Inc in an interview with the Financial Post. “He has done a great job improving the assortment, but the challenge is to move that much merchandise and change that many stores in the little time as he has had. It is a huge challenge.”
Evans also told the Financial Post that Sears' poor earnings only make it a larger target for U.S. retailers — like Nordstrom or Macy's — looking to expand into Canada.
As the Huffington Post Canada reported earlier, Canada is attractive to U.S. retailers for several reasons, one of them being the shrinking number of local retailers. And when it comes to shrinkage, Sears Canada is all to familiar with the concept: the company has recorded six consecutive years of declines in revenue at stores opened at least a year, reports the CBC.
With Files From the Canadian Press
Also on HuffPost:
The Booming Canadian Dollar
The Canadian dollar has risen from around 62 cents U.S. in 2002 to around $1.03 U.S. at present. What this means is that, from the perspective of international retailers, we're spending a lot more in stores. Colliers Canada reports that <a href="http://www.collierscanada.com/en/News/2012/Canada-Still-Magnet-for-Foreign-Retail" target="_hplink">Canadian shopping malls brought in 50 per cent more in sales, per square foot, than their U.S. counterparts</a> in 2011. While U.S. malls earned $400 U.S. in revenue per square foot, at Canadian malls it was around $600 U.S.. That's a powerful magnet for U.S. retailers looking to expand.
Our Existing Stores Are Disappearing
Remember Zellers? How about Eaton's, or <a href="http://en.wikipedia.org/wiki/F._W._Woolworth_Company" target="_hplink">Woolworth's</a> or <a href="http://en.wikipedia.org/wiki/Simpsons_(department_store)" target="_hplink">Simpsons</a>? <a href="http://en.wikipedia.org/wiki/A%26A_Records" target="_hplink">A&A Records</a>, anyone? Those are just a few of the retail names that have disappeared or are disappearing from Canada's street fronts and malls. With traditional retailers fading, U.S. retailers are seeing opportunity left and right. They are also seeing vacant space they can easily convert to their own stores, as <a href="http://www.huffingtonpost.ca/2012/08/22/target-canada-zellers-protest_n_1822223.html" target="_hplink">Target Canada is doing with Zellers locations</a> and <a href="http://www.huffingtonpost.ca/2012/09/11/nordstrom-canada_n_1874734.html" target="_hplink">Nordstrom Canada is doing with Sears stores</a>.
Our Retail Sector Is Growing Fast
Growth in Canada's retail sector was <a href="http://www.nasdaq.com/article/the-promise-of-the-canadian-retail-market-20120914-00599" target="_hplink">34 per cent faster than it was in the U.S. between 2004 and 2008</a>, according to data from the Retail Council of Canada -- and that's before the financial crisis sank the U.S. into an economic no-man's-land. The Council's data also shows that retail grew 96 per cent faster than the Canadian economy as a whole during that period.
There Are Too Many Stores In The U.S., And We Have Room For Growth
In the U.S., retail supports one-quarter of all jobs and accounts for about 18 per cent of the country's economic activity. By comparison, Canadian retail supports only about one-eighth of all jobs in the country, and retail accounts for just more than six per cent of all economic activity, <a href="http://www.nasdaq.com/article/the-promise-of-the-canadian-retail-market-20120914-00599" target="_hplink">according to a report at Nasdaq.com</a>. This would suggest that the U.S.'s retail market is saturated, while there is plenty of potential growth in Canada.
More Of Us Have Disposable Income
The U.S.'s persistently high unemployment rate in recent years has left many Americans with little cash for buying anything beyond the basics. Data from WSL/Strategic Retail shows that <a href="http://www.businesswire.com/news/home/20120914005044/en/Canada-Land-Retail-Opportunity-WSLStrategic-Retail" target="_hplink">only about 50 per cent of Americans have disposable income</a>, but the same is true for 64 per cent of Canadians.
Less Competition From Online Shopping
Canadians often complain that our options for online shopping are more limited than in the U.S., and that seems to show in our shopping habits. Research on women's shopping habits finds that <a href="http://www.businesswire.com/news/home/20120914005044/en/Canada-Land-Retail-Opportunity-WSLStrategic-Retail" target="_hplink">only about half of Canadian women shop online</a>, compared to 75 per cent of American women. That means more opportunity for brick-and-mortar stores planning to move into Canada.
We're Not As Big On Bargain-Hunting
The <a href="http://www.businesswire.com/news/home/20120914005044/en/Canada-Land-Retail-Opportunity-WSLStrategic-Retail" target="_hplink">same study of female shoppers</a> found that, while 68 per cent of American women use coupons when shopping, only 55 per cent of Canadian women do. Half of Canadian women look online for coupon opportunities, compared to 61 per cent of Americans, and 57 per cent of Canadian women pick up in-store circulars, while 71 per cent do so in the U.S. This lack of hunger for bargains translates into bigger profit margins for retailers.