BUSINESS

Sears Canada Layoffs To Hit Nearly 800 Staffers, Sources Say

11/26/2013 03:16 EST | Updated 01/26/2014 05:59 EST
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TORONTO - Sears Canada (TSX:SCC) is laying off another 800 employees across its operations in the latest round of major cuts that have involved closing several of its highest profile department stores.

The retailer said Tuesday that most of the job losses would come from its repair parts and service business, where 712 staff are being eliminated over the next six months.

An additional 79 employees will lose their jobs at the company's Toronto head office, it said.

The move comes as the retailer scales back operations as part of a multi-year plan to reduce operating costs and generate cash from its deeply eroded position in the industry.

The company has already laid off thousands of people over the past few years and once the latest round is completed it will have 25,000 employees across the country.

Sears Canada said it plans to contract out work for its repair services in mid-sized markets, although it will still have technicians who work directly for the company in areas it considers "major markets."

"The changes we are announcing today are being made to bring the structure of our organization in line with the size of our business," said president and chief executive Doug Campbell, who was recently hired to oversee the turnaround effort.

Last week, the company shifted a huge chunk of cash back to shareholders through an extraordinary dividend payment of $5 per share, most of which was financed by selling five leases at some of its most prominent locations back to mall operators, a transaction that will generate more than $400 million.

Most of the $453 million payment went to three investors who together own 88.8 per cent of Sears Canada.

Parent Sears Holdings Corp. (Nasdaq:SHLD), owns 51 per cent of the company and hedge fund ESL Investments Inc., headed by financier Edward Lampert, owns 27.6 per cent. Lampert owns another 10.2 per cent stake in Sears Canada himself.

An additional $315 million could be headed to shareholders once Sears Canada decides what to do with the proceeds from the sale of other assets, slated to occur in January.

Initially, the company's turnaround plan had focused on injecting new life into its department stores through renovations that were championed by former CEO Calvin McDonald, who made a sudden exit from the company in September.

Earlier this month, Sears Canada posted an enlarged net loss of $48.8 million or 48 cents per share — mainly due to severance and restructuring costs. The company said the net loss included $20.2 million for severance and, filtering out the extra costs, it would have reported a profit.

Sears has already closed some of its big city locations in Western Canada and announced plans to vacate other large stores, including its flagship downtown Toronto location.

Once those transactions are completed, the company will have 111 department stores as well as its online and catalogue business.

Shares in Sears Canada, which confirmed media reports of the layoffs after markets closed, ended the session Tuesday ahead four per cent, or 73 cents, at $18.98 on the Toronto Stock Exchange.

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