Tuesday, 29 October 2013

News: Sears Confirms Details of $400 Million Deal

Sears flagship at the Toronto Eaton Centre

As Toronto Shopkeper reported yesterday, Sears Canada confirmed today the sale of 5 store leases in a transaction worth $400 million.

Sears will close their Toronto Eaton Centre, Sherway Gardens, and London-Masonville locations by February 28, 2014. A year later they will close their stores at Markham's Markville Shopping Centre and Richmond Centre in British Columbia. In total 965 associates will be affected by the closures. Sears has said qualified associates could be offered positions in other stores. All the malls in question are owned by Cadillac Fairview (except Richmond Centre which is co-owned with Ivanhoe Cambridge).

"Unlocking the value of assets is one of the three levers we have said we will use as a way to create total value for the Company," said incoming Sears CEO Douglas Campbell.  "When proposals such as this one are presented to us, we must weigh the value of the transaction against the value we will obtain from continuing to operate those stores in their current locations.  In this case, we were presented with an opportunity that gives us a significant financial benefit without changing our plans to improve the business and make Sears more relevant to Canadians. Our primary focus of creating long-term value for the Company is best approached by focusing on the basics of the business and continuing to become more relevant with Canadian consumers coast to coast."

Last month former Sears CEO Calvin McDonald resigned from the retailer in the midst of a three year planned turned around. McDonald focused on key product categories and shed store leases to some high profile Sears locations. Today's announced closings combined with those previously announced mark the company's retrenchment from some key urban markets.

"The Company will operate 111 full-line department stores after Sears vacates these five stores," continued Mr. Campbell, "which continues to be a substantial retail presence across Canada, especially in suburban and mid-size markets where Sears plays a major role in the marketplace."

When Sears acquired the bankrupt T. Eaton Company Limited in 1999, it gained entry to a number of prime urban spaces. Prior to that the retailer had operated primarily in suburban markets. The Toronto Eaton Centre and Sherway Gardens stores were both former key Eaton's stores and Sears was reported to have inherited their advantageous lease rates.

There has been intense media speculation about the future tenant (or tenants) of the Eaton Centre location with both Nordstrom and La Maison Simons being touted as most likely.

As part of the deal Sears will retain the upper four floors of the Eaton Centre location where it maintains its head office.

It was also reported today that Sears Canada's struggling US parent Sears Holdings is considering spinning off their Lands' End and Auto Center businesses.