Sears faces uncertain future in Canada: analyst
Published Wednesday, December 28, 2011 8:22PM EST
Sears Canada won't close any stores here even as retail competition heats up and consumers look for deeper discounts on merchandise.
Sears Holdings Corp. in the U.S. announced plans Tuesday to close between 100 and 120 Sears and Kmart stores and cut inventory after slow sales during the holidays. The company has more than 4,000 stores in the U.S. and Canada.
The Canadian retailer has made changes recently to its management team because of falling sales, but some analysts think it should probably close stores that aren't performing well.
Sears Canada laid off 70 employees from its head office in Toronto last month and lost nearly $47 million in the previous quarter.
Its stock fell more than five per cent in Wednesday morning trading on the Toronto Stock Exchange.
One analyst told Canada AM on Wednesday the company needs to find its niche or it will lose to more aggressive competitors.
"Whenever you see a retailer doing the types of rationalizations that Sears is doing, clearly this does not bode well," said Robert Soroka in an interview from Montreal.
"There's obviously some concern as to whether they could sustain themselves," he said.
Retailers like Sears must also consider the addition of aggressive U.S. companies like Target to the marketplace, which plans to open about 135 stores in Canada beginning in March 2013, and the relative success of The Bay, which has been offering consumers deep discounts, Soroka said.
"Sears has maintained is antiquated position for a very a long time. It is a mid-range market retailer for a market that is really diluted," he said.
While The Bay also considers itself a mid-range market retailer, its promotions and discounts appeal to cost-conscious consumers, he said.
"They are very strong with respect to promotion and as a result they are getting that discount consumer," Soroka said.
It's hard to say whether these factors will force Sears to close stores or cut inventory in Canada, he said.
A spokesperson for Sears Canada said the company has no plans to shutter stores.
"There are no Sears stores being closed in Canada and people shouldn't speculate about something that isn't happening," Vincent Power, director of corporate communications for Sears Canada, told CTVNews.ca by phone.
"It's a U.S.-based story and to talk about Sears stores closing in Canada is erroneous."
Soroka said the biggest change in the market is brand loyalty, which doesn't exist in the Canadian retail landscape anymore.
"We're very sharp consumers. We're looking for the best deal, the best merchandise. We're not necessarily committed to a particular brand name," Soroka said.
If Sears is counting on consumer loyalty to carry its brand in Canada, it's "putting its money on the wrong horse," he said.