OTTAWA — After a failed effort to find a solution to save the company, Sears Canada said on Tuesday that it would shut down operations, leaving about 12,000 employees out of work.
The company, which operates separately from Sears Holdings of Hoffman Estates, Illinois, has been in a downward spiral for at least three years and has been operating under creditor protection since June 22. The company has been losing about 1 million Canadian dollars a day.
As customers increasingly shift their retail shopping to e-commerce, traditional retailers are under pressure to keep up, closing stores and revamping debt to cut costs. Although high shipping costs have limited the growth of online shopping in Canada relative to the United States, Sears has nonetheless struggled to turn its fortunes around.
Sears Canada has been gradually selling its best retail leases for some time, particularly to Nordstrom, and the closing of its 166 remaining stores is most likely to be a blow to many landlords, some of whom are already stuck with unwanted space. More than two years after Target beat a hasty retreat from Canada, millions of square feet it had rented remain empty.
During its recent restructuring, Sears successfully found buyers for some operations, including a division that offered home services like air duct cleaning. Recently, it sold 11 store leases, its trucking operation and a warehouse in Calgary, Alberta. But the only serious buyer for the bulk of the company appeared to be a management group headed by Brandon Stranzl, the executive chair of Sears Canada.
In its brief statement Tuesday, Sears did not discuss the offer from Stranzl’s group, although many analysts said that the company’s most recent lfor ease sales would have made its recovery plans uncertain.
“Following exhaustive efforts, no viable transaction for the company to continue as a going concern was received,” Sears Canada said.
Liquidation sales will start next week, pending court approval.
Aside from the employees who will lose their jobs, about 18,000 retirees of Sears Canada may be facing cuts to their pension payments. The company’s pension plan has a deficit of nearly 270 million Canadian dollars. In a victory for the pensioners, a judge froze payments to other creditors last month until the pension issue is resolved.
But the fate of the compensation and benefits of the company’s current employees was unclear. About 2,900 employees who were laid off after the company’s insolvency filing in June did not receive severance payments. The company came under severe criticism and calls for boycotts by shoppers after it emerged that it had paid more than 9 million Canadian dollars in bonuses to keep top executives. The company responded with a “hardship fund” of 500,000 Canadian dollars for the laid-off workers.
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