Calvin McDonald wouldn’t even shop at Sears.
Indifferent to its offerings, he was far from alone among Canadian consumers to bypass the stores. But he wasn’t just any would-be customer: At the time, he was being recruited to take the reins at the ailing department store retailer.
Mr. McDonald initially rejected the idea, feeling he wasn’t ready for such a high-stakes test of his merchandising mettle. But then he reconsidered, thinking he could fix the missteps and revive the patient. Within a month, he stepped into one of Canada’s toughest retailing roles, abandoning in mid-2011 the relative security of his senior executive job at grocery titan Loblaw Cos. Ltd.
“I think a lot of people saw it as a no-win situation,” he said, after slipping into a booth at the Joey Eaton Centre restaurant in Toronto, just steps from the Sears Canada Inc. flagship store and ground zero of the retail battle zone where foreign rivals want to lay claim to his space for their own store. “I believe the business can be successful.”
The risk is that he left a safe job where he had been on the fast track. If he turns around Sears, he will have beaten the odds; if he doesn’t, he will have gained valuable CEO experience and positioned himself, perhaps, for a leadership role elsewhere.
As Doug Stephens, president of Retail Prophet Consulting, put it: “It’s a no-lose situation, in the sense that, if he fails, I don’t think anyone is going to blame the guy who wasn’t able to resurrect Sears because a lot of people thought that was an unachievable goal in the first place. If he succeeds, my gosh, he is a genius.”
Mr. McDonald, an avid triathlete and marathon runner who turns 41 next month, faces enormous hurdles in repairing a retailer whose sales and profits have slid annually since 2006, posting a $60.1-million loss in 2011. Department stores are racing to reinvent themselves. Archrival Hudson’s Bay Co. this week confirmed its plans to go public soon in a bid to step up its makeover. U.S. competition will intensify soon from discounter Target Corp. and upscale Nordstrom Inc.
The Sears CEO’s decision to exit three of his prime stores this month in a $170-million deal with their landlord, which opened the way for Nordstrom to move in, raises the stakes further as the U.S. retailer still hankers after Sears’ prized Toronto Eaton Centre outlet.
To fight the burgeoning forces, Mr. McDonald has borrowed from the Loblaw transformation playbook, which he helped to spearhead, of returning to its roots and refocusing on private-label strengths. At Sears, he is concentrating on “hero” categories of appliances and mattresses, which the Bay has largely abandoned, and private-label lines, including Jessica fashions and Kenmore appliances. He’s pumping up his more promising departments, such as men’s clothing, women’s dresses and children’s products. He has lowered prices and loosened Sears’ return policy.
A wild card in Mr. McDonald’s turnaround efforts is U.S. hedge fund manager Edward Lampert, the controlling shareholder of parent Sears Holdings Corp. Struggling with overall weak results, he has started selling Sears store leases and other assets. By the end of this year, the parent will trim its stake in the Canadian division to 51 per cent from about 95 per cent. Analysts speculate Sears Canada is ripe to be snapped up by a foreign player.
What exactly is Mr. Lampert’s end-game? “I don’t know,” Mr. McDonald said quietly.
It’s one of the few silent moments during a three-hour lunch in which the Sears CEO was brimming with ideas on his vision, the wider merchandising landscape and his own retail journey. He was catching his breath after a busy morning that started with him taking one of his four children – his six-year-old son – to a 6:30 a.m. hockey practice.
Gearing up to run the Chicago Marathon that coming weekend, Mr. McDonald ordered a protein-and-carb combo of steak and sushi. He was taking a “rest” in his prerace training, having cut his weekly running almost in half, to 48 kilometres.
His sprint to revitalize Sears is an even more all-consuming pursuit as he focuses on motivating what has been a demoralized staff to execute his battle plan. “I probably haven’t wanted anything more in my life.”
After having been approached by a recruiter in the spring of 2011 about taking the Sears job, he sought advice from his wife and father-in-law, David Williams, then the interim CEO of Shoppers Drug Mart Corp. and a former Loblaw executive. It didn’t take long for Mr. Williams, who remains on Shoppers’ board of directors, to suggest that Mr. McDonald take the riskier path.