TORONTO - Sears Canada is placing its bets on becoming a new stop for consumers who want affordable, high-quality yoga gear.
The struggling department store chain says its Pure NRG Athletics line of yoga clothes has been a hit with customers since it was introduced in February.
The chain says it sells yoga pants for $14.99 or $29.99 — a steal compared to similar clothing from other retailers, like Lululemon Athletica.
"Not many Canadians can afford to pay over $100 for a pair of yoga pants," Sears president and CEO Douglas Campbell said Wednesday following the release of the company's latest quarterly earnings.
"So we're going to take some of the best in class yoga pants we can find and engineer them to a price point where our ladies are willing to spend."
Over the last few years, Sears Canada (TSX:SCC) has faced stiff competition from long-time rivals such as Hudson's Bay Co. (TSX:HBC), and American giants like Walmart and Target, and has rebranded itself as a destination for middle-class shoppers and not those looking for high-priced runway styles and lavish decor.
A large part of whether the company's three-year turnaround plan will be successful depends on whether it can transform itself into a place families or frugal Canadians will think of first for reasonably-priced, basic clothing items like parkas, dress shirts and black dresses.
"Canadians still maintain those middle-class sensibilities even if they're more affluent," Campbell said.
"Even if they can afford to spend $600 or $700 on a winter coat, they're not going to spend (that) if they know they can get the right features to keep them warm and it's still fashionable for less than $200. That's really the space where we're going to play in."
But even though that's the plan, the latest earnings from the embattled retail chain show that it is still struggling to stay relevant to consumers. Its shares dipped 10 cents to close at $15.21 on the Toronto Stock Exchange.
Sears Canada saw its net loss more than double in the first quarter as it felt the impacts of shoppers staying away due to a long winter throughout most parts of Canada.
It posted losses of $75.2 million, or 74 cents per share, for the three-month period ended May 3. This compared with a loss of $31.2 million, or 31 cents per share, for the same period a year earlier.
Campbell said the cold weather meant the retailer saw sales on in its spring merchandise lag because it delayed bringing out the merchandise for several weeks.
But an upside was that it also allowed the retailer to clear leftover fall and winter merchandise, "virtually emptying our stockrooms and getting it in front the customer."
Sears Canada was able to end the quarter with $99 million of less inventory than during the same period a year earlier, which means that merchandise will not have to be sent to outlets to be sold at lower prices.
It said its latest quarterly net loss included pre-tax expenses of $7.6 million primarily related to severance costs. Also included in net loss for the quarter were pre-tax lease exit costs, warranty and other costs related to such things as the future settlement of retirement benefits, totalling $11.2 million.
Same-store sales on locations open for at least a year and an important metric in the retail industry, decreased by 7.6 per cent year-over-year.
Total revenues for the quarter were $771.7 million down from $867.1 million year-over-year, affected by a number of factors, including store closures.
Last week, U.S.-based Sears Holding Corp. announced it was considering selling its 51 per cent interest in Sears Canada.
Campbell said the Canadian division can continue to concentrate on its turnaround efforts because the parent company is exploring this option by itself.
"There's no added pressure," he said. "It doesn't really change the operations or the strategy that we're going on. We're going to go about the transformation and turnaround as fast as we possibly can, regardless if Sears Holdings is the owner or they decide to divest and somebody else is the owner."
In January, the retailer announced it would cut 2,200 employees from its payroll, on top of thousands more that were laid off last year.
It has also sold leases to some of its most prominent locations, including its flagship location at the Toronto Eaton Centre, as part of a number of cost-cutting measure.
The company has said the savings will help it invest $30 million over the next two or three years in an new inventory management system and website enhancements to improve the customers' online shopping experience. This will include improving educational sections on its website, which can help consumers considering purchasing major appliances, to find the right models for them.
Sears Canada operates a retail network that includes 176 corporate stores, 234 Hometown stores, more than 1,400 catalogue and online merchandise pick-up locations, 97 Sears Travel offices and a nationwide repair and service network.
Follow @LindaNguyenTO on Twitter.
Note to readers: This is a corrected story. An earlier version misspelled the name of Sears' yoga brand, implied 2,200 layoffs were a future target, not previously announced.
1. Abercrombie & Fitch
Abercrombie & Fitch first announced its plans to close 180 stores by 2015 more than two years ago. In its most recent quarterly report, the company said it had closed 10 stores by November of last year and would close another 40 stores by the end of its fiscal year. This total does not include the 20 stand-alone Gilly Hicks brand stores, which the company also plans to shutter this year. Abercrombie & Fitch’s stock has struggled, posting one of the largest declines in the S&P 500 during 2013. To improve performance, the retailer is planning to shift marketing for its Abercrombie & Fitch to older shoppers while transforming its Hollister stores to a fast-fashion approach in line with H&M and Zara. A succession plan for CEO Mike Jeffries is also in the works. Last year, shareholders from Engaged Capital publicly campaigned for Jefferies’ dismissal, citing the retailer’s failure to adapt to fast-fashion, and Jeffries’ statements about excluding customers that he thought were too heavy for the brand. <a href="http://247wallst.com/special-report/2014/03/12/retailers-closing-the-most-stores/#ixzz2w8Yuflg0" target="_blank">Read more at 24/7 Wall St.</a>
2. Barnes & Noble
Early last year, Barnes & Noble announced plans to shut a third of its stores over the next 10 years. As of this January, the company had already closed some 14 retail locations, dropping its store count to 663 from the 677 it had when the announcement was first made. Particularly painful for many book-lovers, the retailer chose to close its one-time flagship store in New York City this January. While cost-cutting has helped the company post profits, by some measures the company’s prognosis remains bleak. Book retail has increasingly shifted to online and e-books, dominated by Amazon.com. But while Amazon.com has noted strong sales of its Kindle e-reader, Barnes & Noble’s own e-reader, the Nook, has struggled. Revenue of the bookstore’s Nook division, which include hardware and digital sales, fell by more than 50% year-over-year, and the segment remains unprofitable. <a href="http://247wallst.com/special-report/2014/03/12/retailers-closing-the-most-stores/#ixzz2w8Yuflg0" target="_blank">Read more at 24/7 Wall St.</a>
Aeropostale is the in the midst of closing 40 to 50 stores in 2014, and plans to shutter some 175 stores in total over the next few years. The teen clothing retailer’s net income dropped to $34.92 million in 2013 from $229.5 million in 2010, and its EBITDA fell to $157.89 million last year from $435.45 million in 2010. Pressure from competitors such as Gap and Abercrombie & Fitch, as well as declining mall sales, has driven the company’s share price from $32.08 in 2010 to $7 as of March 2014. Private equity firm Hirzel acquired 6% of Aeropostale in November 2013. Currently, the company is rumored to be in talks with Barclays Plc. because it is seeking either additional financing or to be acquired. Aeropostale’s fast-fashion shipment model, which it took up last year, has largely been unsuccessful. <a href="http://247wallst.com/special-report/2014/03/12/retailers-closing-the-most-stores/#ixzz2w8Yuflg0" target="_blank">Read more at 24/7 Wall St.</a>
4. J.C. Penney
After J.C. Penney’s sales began to steadily decline, the company tasked Ron Johnson, formerly retail head at Apple, with reinventing the retailer’s pricing strategy, only to see sales, earnings, and cash flow fall off a cliff. After years of avoiding closing stores, the company has recently said it would be shuttering several locations. At the start of 2014, J.C. Penney announced 33 store closings, to be completed by May, leading to the loss of about 2,000 jobs. Some investors and pundits believe the company has not been aggressive enough in cutting stores. As of November, the company had 1,095 department stores, down only slightly from past years. Not all news has been bad for the retailer, which reported surprisingly strong earnings in February. Additionally, Standard & Poor’s recently upgraded the retailer’s credit outlook, although it noted changes will still be necessary to improve its credit long-term. <a href="http://247wallst.com/special-report/2014/03/12/retailers-closing-the-most-stores/#ixzz2w8Yuflg0" target="_blank">Read more at 24/7 Wall St.</a>
5. Office Depot
Office Depot merged with rival OfficeMax in November. Since the merger, the company has been cutting jobs at its combined headquarters. The next stage in integrating the two retailers, the company has stated, will be to cut store count. CEO Roland Smith admitted the company’s merger was difficult for many workers, telling the Orlando Sun-Sentinel that “it is difficult to focus on business when your personal future is uncertain.” The company had 1,912 retail stores at the end of its latest fiscal year, including 823 OfficeMax stores. Since the merger, the company has closed 15 of its Office Depot stores and seven OfficeMax locations. <a href="http://247wallst.com/special-report/2014/03/12/retailers-closing-the-most-stores/#ixzz2w8Yuflg0" target="_blank">Read more at 24/7 Wall St.</a>
During the Super Bowl, RadioShack attempted to poke fun at itself, running an ad touting its store remodelling that playfully referenced the store’s reputation as a throwback to the 1980s. But a reinvention alone may not save the electronics retailer — its previous attempt at rebranding itself as “The Shack” never caught on. The retailer recently announced it would close 1,100 out of its more-than 5,000 stores. The company has deemed these closings as critical to its cash-management and turnaround plans, which it hopes would help reverse recent poor results. Both the company’s top and bottom lines have declined considerably in recent years, and its operating cash flow is also down from years past. The fourth quarter of last year, which coincides with the holiday season, was especially troubling. Sales declined 19% at stores open at least a year because of lower foot traffic and weak performance in mobile sales. <a href="http://247wallst.com/special-report/2014/03/12/retailers-closing-the-most-stores/#ixzz2w8Yuflg0" target="_blank">Read more at 24/7 Wall St.</a>
Sears has been heading downhill since 2005, when Wall Street billionaire Edward Lampert merged Sears Roebuck & Co. with Kmart in a deal worth $11 billion. Since 2010, the company has closed roughly 300 stores. One of the few surges in the company’s share price came at the end of January, after it announced the closing of its flagship store in Chicago in April. Shedding its assets has been a major part of the company’s business for years. The company has not only dumped stores, but entire businesses, including Orchard Supplies Hardware Stores, Sears Hometown & Outlet Stores, Lands End, and a part of its stake in Sears Canada. Cowen analyst John Kernan recently noted that he expected Sears Holdings to close an additional 500 stores going-forward. <a href="http://247wallst.com/special-report/2014/03/12/retailers-closing-the-most-stores/#ixzz2w8Yuflg0" target="_blank">Read more at 24/7 Wall St.</a>
Staples recently announced plans to close 225 stores, or roughly 12% of its total count, by the end of 2015. The closures reflect both the company’s struggling sales totals, as well as its shift away from brick-and-mortar business to online retail. In its recent earnings release, the company said almost half of its sales come from online orders, and store closures reflect an opportunity to save money while improving the company’s bottom line. This is not the first time headwinds have lead the company to close stores. In 2012, Staples shut 60 stores, mostly in Europe, as part of its plans to cut costs. The company referred to its shift to online sales. <a href="http://247wallst.com/special-report/2014/03/12/retailers-closing-the-most-stores/#ixzz2w8Yuflg0" target="_blank">Read more at 24/7 Wall St.</a>
9. Toys "R" Us
A Toys “R” Us was taken private by a consortium of companies in 2005. Nearly a decade later, disagreements among the company’s ownership and a high debt burden have weighed down the retailer. In all, Toys “R” Us spent nearly three years trying to time an IPO, before backtracking last May. In early March of this year, industry sources told The Record’s NorthJersey.com that the company would soon close some 100 stores. Whether or not the company decides to close stores, major changes may be needed. Real estate giant Vornado, one of the three co-owners of Toys “R” Us, recently announced a more than $240 million writedown on its investment in the company. Among the reasons it gave were the company’s 2013 holiday sales results, “and our inability to forecast a recovery in the near term.” Toys “R” Us has struggled to keep up with online competition as well. A December report from Bloomberg indicated it was easier to find the holidays’ hottest toys on Amazon.com than through Toys “R” Us’ website. <a href="http://247wallst.com/special-report/2014/03/12/retailers-closing-the-most-stores/#ixzz2w8Yuflg0" target="_blank">Read more at 24/7 Wall St.</a>