Sears Canada Inc. saw its overall revenue fall by 9.6 per cent in the quarter ended Feb. 1, as it closes stores and sells off property.
Same-store sales, an important measure of how well individual stores did compared with the previous year, fell 6.4 per cent in the quarter, adding to fears that Sears Canada store closings have hurt consumer confidence in the retailer.
Sears attributed the drop to bitter winter weather and power outages during the holiday season.
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“We felt the effects of this most notably in the few days leading up to Christmas. In December and January, the store hours we were closed as a result of power failures or weather totalled over 220 versus just under 40 for the same period last year,” said Sears CEO Doug Campbell in a statement.
Sears closed two stores in the Toronto area, including its Eaton Centre location, and one in London, Ont., during the quarter, deeply discounting goods so it could clear the stores. More closings are to come in Richmond, B.C. and Markham, Ont.
It also abandoned its repairs and parts business, selling off Sears Home Services, which promptly went bankrupt.
The retailer’s profit for the quarter was $373.7 million, up from $39.9 million a year earlier. Most of the gain was the result of unusual items resulting from the downsizing, including pre-tax gains of $577.2 million related to early lease terminations and $66.3 million related to the sale of real estate joint arrangements. Sears has sold its stake in eight retail stores.
Sears also faced costs related to the restructuring, including $51.2 million in severance costs.
Net earnings rise
Net earnings for the year ended Feb. 1, 2014 were $446.5 million or $4.38 per share versus $101.2 million or 99 cents per share for the 53-week period ended Feb. 2, 2013
For the year as a whole, its falling market share is reflected in a 2.7 per cent drop in same-store sales.
Sears is feeling pressure from discount chains such as Target and Wal-Mart, who are scooping up department store business, while stores such as The Bay move to the higher end.
But Campbell said he still sees a niche for Sears Canada as a value retailer appealing to middle-class shoppers.
"The management team is focused on providing Canadians with a value proposition that resonates effectively with customers who are seeking quality products at reasonable prices," he said.
"We have taken steps to right-size the structure of the organization relative to the size of the business so, as we head into 2014, we can focus on putting into action the priorities we have identified that will help us serve Canadians more effectively, such as being in stock on fashion basics in every store in every size, expanding our online assortment and website capability, and marketing tactically to the customer segments we have identified as important for Sears."
Sears is still a substantial player in Canadian retail, with total revenues for the year of $3.99 billion, down 8.2 per cent from $4.3 billion the previous year.