If it weren't for Sears Canada, visits to my nearest mall, Yorkdale Shopping Centre, would begin in sheer frustration.
Yorkdale is an immensely popular place: its trendy and abundant stores attract about half a million visitors every week. There’s high demand for the 7,200 parking spaces that surround the 1.6 million square foot mall in northern Toronto, one of the biggest in Canada.
In the past, I’ve spent 20 minutes or more in an excruciating search for a single, unoccupied spot.
Then I learned an easier way – just drive to the lot outside Sears, where I usually find plenty of vacancies.
That extra convenience for me probably isn’t good news for the embattled retailer.
I don’t know if everyone knows my parking trick, but many others enter Sears just to get to the rest of the mall. The moment you step in, it’s instantly clear the department store is struggling. While its fresh new-look store design is brighter, more modern and with wider aisles – there aren’t a lot of shoppers to fill them.
The grim situation was made more evident on Thursday, when the company announced it was laying off 700 workers from its distribution centres and department stores.
You can quickly see what ails Sears Canada just by doing a quick scan of comments left on recent stories about the retailer. Dull fashions, messy stores, poor customer service… the complaints go on.
These are all things that Calvin McDonald, who took on the challenging role of CEO in 2011, has set out to change. And indeed, some stores are less cluttered, products have been streamlined and better presented, clothing lines are a bit more youthful and hip, and there’s a new warm and fuzzy marketing campaign.
And yet Sears had a brutal holiday season, with sales at the Canadian chain in the nine weeks to the end of December falling 5.8 per cent from a year earlier, when sales were already weak. Sears Holdings Corp., which trimmed its stake in the Canadian unit from to 51 per cent from 95 per cent last year, has warned that Sears Canada’s fourth-quarter adjusted earnings before interest, taxes, depreciation and amortization would fall by about half.
In the grand old Canadian spirit, Sears partly blamed the poor performance on the weather, citing the “unseasonably warm temperatures in parts of Canada.”
If only fixing Sears Canada’s problems were as simple as having some arctic air blast in from the north. True, overall it was a pretty ho-hum holiday season last year for retailers in the country, but note that rival the Bay saw a bump of 6.7 per cent in same-store sales for the same nine weeks.
Indeed, on a recent visit, I noticed the Bay right next door to the Sears in Yorkdale was doing much brisker business despite undergoing extensive remodeling that had scaffolding and plastic construction lining spread throughout the store.
Yorkdale is just one of 118 Sears Canada locations in the country. But it constantly ranks in the top five malls in North America for highest sales per square foot. There’s a lot of money to be made if Sears can convince consumers to visit, open their wallets and come back again.
But as Mr. McDonald admits, the turnaround isn’t happening as fast as hoped, and I couldn’t blame any shareholder for wanting to take the stock back to returns.
Not that they are likely to get a full refund, mind you. Shares are trading at 12-year lows and the trend is still down.
Fearless value hunters may be left wondering whether the retailer is going for a fire-sale price and this is the time to buy shares. Perhaps – but I wouldn’t bet on it, not with the arrival of Target within weeks, to be followed soon after by other aggressive U.S. retailers, including Nordstrom.
A key problem: by becoming more contemporary and fashion-conscious, Sears Canada is positioning itself to compete even more head-to-head with Target – a department store Canadians just can’t wait to visit. And it won’t help that 37 per cent of Sears’ stores are within a one-kilometre drive of the planned Target outlets.
Sears Canada does hold leases to many sought-after locations at attractive terms, and has significant real estate assets. If the turnaround fails, or if it needs cash in a hurry, those could prove valuable.
It’s still early in Mr. McDonald’s three-year revamp and Sears Canada’s balance sheet, with virtually no debt, does provide some breathing room. But investors could probably do better looking elsewhere in the retail sector.
For me, I’m just thankful for the parking space.
Readers: What do you think about Sears’ chances for survival? Would you consider investing in the stock as a possible turnaround play? Or should the company pave “paradise” and put up a parking lot?