SEARS TO CLOSE MORE STORES IN COST-CUTTING EFFORTS
Sears Canada Inc. is stepping up its efforts to close another round of stores, raising more questions about its fate and putting pressure on landlords who already have a lot of empty retail space. The struggling Sears has instructed real estate firm CBRE to look for alternative uses for Sears’s weakest stores, such as its clearance outlets, Brandon Stranzl, executive chairman of Sears Canada, said in an inter- view this week. As well, Sears officials are working internally to shrink its store network, he said. He said “everything and anything” is on the table as Sears races to cut costs and revive its core full-line department-store business amid tumbling sales. “We’ve got this network we’re going to rationalize and we’re going to figure out which stores make the most sense,” said Mr. Stranzl, who took the top job last summer. “We’ve got a higher level of activity today than in the past few years” in looking to drop sites. Sears, which sold off some of its best stores over the past few years to raise money, is concentrating now on scaling back its underperforming real estate at a time when landlords grapple with a glut of vacant retail space after chains such as Target Corp. and Future Shop Ltd. closed their stores. Sears’s sales declines over the past decade underline the urgency for it to reduce its footprint. The retailer’s sales have plummeted by almost half to what is expected to be just more than $3-billion in fiscal 2015 from about $6-billion 10 years earlier. Tom Balkos, senior vice-president at CBRE Retail in Canada, confirmed it has been retained as Sears’s real estate adviser and “we continue to do work on numerous real estate efforts for them including various footprint rationalization efforts.”
Sears’s most recent store-closing plans differ from previous shutdowns, which involved landlords often approaching Sears with offers to buy back the retailer’s store leases to replace Sears with alluring foreign retailers betting that these new retailers will draw more customers. However with retailers such as Target and Future Shop closing all of their stores and Staples and Rona downsizing their operations, landlords no longer have enough compelling new retailers to fill so much space. This along with the additional pressure that online shopping is putting on traditional brick and mortar retailers and how quick they can adapt to the new ecommerce era. As for now, Mr. Stranzl said he has made no final decisions on the extent of closings. “We want to fix Sears as a mall-based department store, as a destination for home products in the home stores,” he said. “That doesn’t mean we’re going to keep all the home stores. That doesn’t mean we’re going to keep all the full-line stores.” It goes without saying that Sears’s recent review of its physical-space needs is consistent with what is happening in the marketplace with all long-time North American retailers and only time will tell if the right deci- sions have been made.
Sears has about 10 outlet stores, 40 home stores and 95 traditional full- line department stores.
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SPOTLIGHT ON BUSINESS • APRIL 2016
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