Sears Canada granted permission to liquidate, putting 12,000 people out of a job

TORONTO – Sears Canada has received court approval to proceed with a full liquidation of its remaining stores, signalling the end of an era for a 65-year-old chain that was once a staple at malls across the country.

Ontario Superior Court heard Friday that after weeks of discussion and a bid from the company’s executive chairman, no viable buyer has been found. The move will put 12,000 of its employees out of a job.

“Creditors… [wanted] to push Sears Canada into the liquidation phase because they figure they can maximize what they can get out of the company as people start doing their Christmas shopping,” says NEWS 1130 Business Editor Mike Eppel.

“The timing is horrible for the 12,000 employees, obviously, because they are going to be out of work in the next 10 to 12 weeks. But from a creditor’s standpoint, they’re in it for the money at this point and the last ditch efforts to find a buyout to save some of the brands. These are literally the last days of the retailer.”

Justice Glenn Hainey approved Sears Canada’s motion to liquidate its remaining 130 stores, and said he was satisfied that there was no viable alternative following a months-long saga stemming from the embattled retailer’s decision to seek protection from its creditors in June.

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The loss of Sears’ remaining 130 locations will leave gaping holes in many malls across the country, but Eppel suggests the writing was on the wall.

“The downfall of Sears Canada actually started back in the mid-2000s because the hedge fund owner of the parent company in the US — Eddie Lampert of Sears Holdings — decided that it was better to buy back stock as opposed to reinvesting in stores,” explains Eppel, who points out the company put about a $1.50 per square foot into reinvestment while competitor Walmart is sinking over $9 per square foot into reinvestment.

“You have to reinvest in stores and that’s what started the spiral, plus they sold assets trying to basically burn the furniture to keep the house heated.”

Orestes Pasparakis, a lawyer representing the court-appointed monitor FTI Consulting Canada, said it supported the liquidation because it did not think there was any other option.

“We recognize that today the order will effectively bring Sears Canada’s 65 years as a national retailer to an end,” he told the court. “Many people have worked hard to understand whether there is a viable alternative. It appears that there is not.”

A buyer group led by Sears Canada executive chairman Brandon Stranzl had been in discussions to purchase the retailer and continue to operate it. Stranzl, who stepped away from his role with the company in August to launch a bid, was in the Toronto courtroom on Friday.

Jeremy Dacks, a lawyer for Sears Canada, told the court Friday the company had remained optimistic and many stakeholders worked “tirelessly around the clock,” but ultimately decided liquidation was the best way forward.

Under the terms of the liquidation agreement, Sears Canada can terminate the agreement if another potential transaction emerges, but will need to pay a break fee and expense reimbursement totalling $4.55 million, the court heard.

Susan Ursel, a lawyer representing current and former employees, told Justice Hainey Friday that they will continue to support discussions towards a potential transaction.

“This company has touched the lives of generations of Canadians,” she told the court.

“For employees and their families, it has been a source of livelihood, community, camaraderie and pride. That we’ve come to this juncture is a source of frustration, anger in some corners, and apprehension for many.”

Sears Canada currently has 74 full department store locations, eight Sears Home Stores, and 49 Sears Hometown stores, facing closure. It currently has approximately 12,000 employees, three-quarters of which are part-time.

That tally doesn’t include the 2,900 job cuts Sears Canada previously announced in June, when it announced the closure of 20 department store locations, 15 Sears Home stores, 10 Sears Outlet and 14 Sears Hometown locations.

Expect liquidation sales as early as next week

Liquidation could start as early as Oct. 19, and could continue for 10 to 14 week, stretching closing sales across the busy holiday shopping period.

While Sears’ creditors want to get as much money out of the company ahead of the holiday seasons, one expert warns not to expect everything to go on sale.

“Sears will be looking to unload as much of that inventory as they can. Are they going to totally give stuff away? C’mon, be realistic,” explains SFU Marketing Professor Lindsay Meredith. “There will be some price at which it makes sense to ship some of that expensive inventory back to other stores in the United States.”

He says those more expensive items may include things like lawn and garden tractors. But, he adds all this likely means big liqudation sales for holiday shoppers for other items.

“Liquidation can be a slow and painful process. Look, you don’t want to give your inventory away. What it means is you’re going to probably tried to be very price-competitive and get the stuff moving, get it out of there. So some of these stores could move out very, quite quickly. Other stores perhaps you might see some really good Christmas sales.”

Of the 130 locations nation-wide slated for closure, six will close up shop here in the Lower Mainland.

“And regrettably, again, you’re going to have an awful lot of poor employees who, you know what, this is not exactly their finest Christmas-hour unfortunately,” Meredith says. “Unemployment before Christmas is no fun.”