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Sears Canada (1952-2017)

  • Thread starter CanadianNational
  • Start date
Very interesting, long-format article by Marina Strauss in today's Globe.


Who killed Sears Canada?
The Globe and Mail, 21 October 2017

One key quote:

So who killed Sears Canada? The dust hasn't yet settled on its tragic collapse, but the accusations are already flying thick and furious.

There's no doubt that part of the problem was a majority investor who treated Sears like a cash-spinning asset, rather than a company that needed investment and sound management to adapt and grow in a challenging marketplace. Since 2005, Sears Canada has been a bountiful piggy bank for Lampert. During that period it paid out more than $2.9-billion in dividends, and the lion's share of that money went to Sears Holdings and ESL Investments, which were both controlled by the hedge fund manager. Meanwhile, the amount re-invested in the business to help it grow and adapt—as reflected by the capital spending – fell from $86-million in 2005 to just $27.4-million last year. Ironically, it's also likely that Mr. Stranzl's manic last-minute bid to save the company, which meant borrowing to bet big, ended up hastening its demise.

The retail sector as a whole is having a tough time. Amazon is stealing share, margins are tight, and only the strong survive. Over the last 20 years, Sears Canada had become a lumbering, out-of-touch dinosaur, and there's lots of blame to go around for that. The department stores which have survived long ago realized that they needed to specialize or die.​
 
In the early 2000s Sears should have closed all but a few flagship stores, and then moved everything to e-com, using its catalogue outlets as courier pick-up locations, like the Amazon Locker and Pickup locations today.

Also, Sears Canada should have merged with Sears USA, as opposed to having all the duplication of functions and staff. Instead just stick a .ca on the mirror Canadian site. This will be the fate of Home Depot Canada, if they're smart, because it makes no sense to have a complete national head office operation for a market smaller than the state of California. Back to Sears, and they should have kept Lands' End, I shop them all the time.
 
Admiral Beez said:
Also, Sears Canada should have merged with Sears USA, as opposed to having all the duplication of functions and staff.
Click to expand...
That would have no doubt, accelerated the demise of Sears in Canada. Instead of talking about bankruptcy in 2017, we would have been talking about it back in 2010. Uncle Eddie would have shut down all stores in Canada in order to fully milk the Canadian side of operations out of cash.

Just look to your previous example of Lands' End to see what would've happened with Sears Canada. Uncle Eddie is America's worst CEO and there's nothing that can be done to get around that point.
 
Admiral Beez said:
In the early 2000s Sears should have closed all but a few flagship stores, and then moved everything to e-com, using its catalogue outlets as courier pick-up locations, like the Amazon Locker and Pickup locations today.
Click to expand...

Nope. First of all, much of Sears business is soft goods, and that's something which just doesn't translate well to online. Second, Sears had a large presence in smaller cities and rural areas, and many of those locations were vital to their surrounding communities.

Don't believe the widely-parroted narrative that Sears was killed off by amazon or any other online retailer. Sears was killed off by Eddie Lampert, who drained the chain of all cash, sold off everything of value, refused to reinvest in the stores, and created a toxic work climate. The result was that Sears became such an unpleasant place to shop that the few people still willing to go through the dilapidated and poorly-stocked stores found it almost impossible to actually buy anything.

This is not a "times change, they didn't" story. It's a "vulture capitalists destroy large business, throw thousands out of work, shortchange countless suppliers, and walk away from the ruins with their pockets full" story.

Admiral Beez said:
Also, Sears Canada should have merged with Sears USA, as opposed to having all the duplication of functions and staff.
Click to expand...

This would have been wholly impractical for legal and logistic reasons.
 
Admiral Beez said:
This will be the fate of Home Depot Canada, if they're smart, because it makes no sense to have a complete national head office operation for a market smaller than the state of California. Back to Sears, and they should have kept Lands' End, I shop them all the time.
Click to expand...

No. Canada is a very different market, and you have the added complication of serving customers in two languages. I know someone who works at the Canadian Home Depot head office – they work closely with Atlanta, but there is a need for a dedicated Canadian head office with their own merchants and logistics.
 
Agree. Having been absorbed by Sears Holdings would have been disastrous for Sears Canada, and any administrative savings would have been negligible in the big scheme of things.

There was no logic to closing most of its stores in the early 2000s either, given how advantageous most of the leases are, and it likely would have hampered their efforts at moving towards an omnichannel model (which they didn't do either, but should have).
 
I understand the arguments for and against amending our bankruptcy and insolvency laws to give pensioners secured or priority status in insolvency situations.

What I don't understand is the law involving the funding of pension plans, and how a company (such as, say, Sears Canada) is allowed to let its pension fund fall seriously into the hole while billions are paid out as dividends to shareholders. Are there similar arguments for and against letting pension plans become underfunded? Is anyone familiar with this area?


Politicians, retirees push for new laws to protect pensioners
CBC News, Julie Ireton, 25 Oct. 2017
 
Amare said:
I had a good laugh out of this one, here is America's worst CEO sharing his "expertise" on the demise of Sears Canada:
Click to expand...
Why is he America's worst CEO? He ensured that he and his shareholders made big dividends by stripping out the value of Sears Canada (reminds me of Dominion), ensured his companies owned and then re-leased the properties at a profit, and used bankruptcy laws to withhold funds from suppliers, pension funds and employees. Sounds like a CEO on a tear.
 
Admiral Beez said:
Why is he America's worst CEO? He ensured that he and his shareholders made big dividends by stripping out the value of Sears Canada (reminds me of Dominion), ensured his companies owned and then re-leased the properties at a profit, and used bankruptcy laws to withhold funds from suppliers, pension funds and employees. Sounds like a CEO on a tear.
Click to expand...

The pages of the Wall Street Journal and the business section of a book store are full of stories about CEOs that are celebrated for their start-ups, corporate turn-arounds or general management skills. Eddie Lampert might be a "successful" CEO for his ability to suck dry two corporate empires that were once the #1 and #2 retailers in the world, but had a CEO come in and turned those two companies right around, in the face of existing and new competition, that would be a story.

Instead, the business book section will be full of "what happened to Sears" narratives and Eddie Lampert hatchet jobs.
 
Lampert sucked money out of the company, but he destroyed value (Sears Holdings lost half its value in five years with Lampert at the helm, and after 12 years Lampert turned an $11 billion company into a $1.6 billion one) and effectively took an ax to the share price. He favoured one-time dividends over short-term and long-term growth, and routinely sacrificed easy income in favour of crackpot management theories. Even the assets he sold he held on to for too long, and ended up depleting value. He burned a lot more money than he earned.
 
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