UPDATE 2-Sears Canada shares down on Target's entry plans, weak results

Wed Feb 27, 2013 2:07pm EST

* Fourth-quarter same-store sales down 3.8 pct

* Revenue down 5 pct at C$1.29 bln

* Shares hit two-year low

Feb 27 (Reuters) - Department store chain Sears Canada Inc reported a fall in revenue for the 16th straight quarter on a day when Target Corp said it would open its first 24 Canadian stores by April, intensifying competition in an already crowded market.

Shares of Sears Canada, 51 percent owned by U.S.-based Sears Holdings Corp, fell as much as 4 percent to a two-year low of C$8.88 on the Toronto Stock Exchange.

Sears Canada said on Wednesday its revenue for the November-January quarter, which includes the critical holiday shopping season, fell 5 percent to C$1.29 billion.

Sales at established stores fell 3.8 percent on lower sales of home electronics and snowblowers.

Department stores in Canada and the United States are struggling with declining sales of electronics as they face increasing competition from online retailers.

In addition, Canadian retail sales plunged 2.1 percent in December in a weak Christmas shopping season, Statistics Canada said on Friday. Department store sales fell 9.6 percent.

Sears Canada is also facing increasing competition as U.S. retailers such as Wal-Mart Stores Inc expand their Canadian operations and new ones like Target enter the country.

To compete with the new entrants and to reclaim lost market share, Sears Canada announced a three-year plan in 2012 that includes making radical changes to its pricing strategies and sprucing up stores.

However, Chief Executive Calvin McDonald said last month he was not entirely happy with the company's progress in the 19 months since he took the top job.

Target and Wal-Mart Stores continue to be bullish on the Canadian market despite the falling sales at Sears Canada and Canadian Tire Corp. Same-store sales at Canadian Tire fell 1.1 percent in the quarter ended Dec. 29.

Sears Canada said fourth-quarter profit fell about 3 percent to C$39.9 million ($38.8 million), or 39 Canadian cents per share. The number included a pretax gain of C$29.7 million from a voluntary buyout program and the sale of a joint venture interest.

Sears Canada shares have fallen 21 percent in the year ended January, while the broader S&P TSX Canadian consumer discretionary index has risen 20 percent during the same period.

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Comments (1)
RetailGuru wrote:
Mr. McDonald is approaching the two year mark of his three year plan with no improvement in sales performance in a period when there was an additional week of sales to be had and also all Zellers stores were shut down versus the year prior.

How can there be any improvement if Mr. McDonald keeps firing everyone who was brought in to help turn things around.

One (of the many) problems with Sears is that they brought in bright, talented staff who had lots of success with other apparel or home decor retailers, but in 6-9 months on the job Mr. McDonald has fired every one of them or they left on their own recognizing that the transformation strategy outlined by Mr. McDonald is grossly flawed. In their place, Mr. McDonald has brought in his cronies from his former grocery employer who know nothing about apparel or home decor retailing, or better yet he has brought back crusty Sears retirees who were part of the original erosion and downfall of Sears – way to go Calvin.
We can get into all of the other problems at Sears, including Mr. McDonald’s flawed strategy, his self promoting without any substance, the rancid corporate culture, the lack of processes and infra-structure, the lack of best in class talent, etc. But we don’t have enough time to get into it all.

Bottom line is they lost focus and are not relevant anymore.

Is Mr. McDonald to blame, no, but he hasn’t helped matters. Should such a young and unexperienced 1st time CEO who has never turned around a poor performing company be expected to pull off this type of miracle with Sears? It would be unreasonable to expect him to pull it off. But don’t feel sorry for Mr. McDonald, his move to Sears wasn’t about helping Sears, it was about serving his own personal interests as he was passed over for the No. 1 spot at his former employer. Even after he fires or lays off thousands of employees, he will still take home his $1 million+ salary and be protected by a very attractive golden parachute.

Feb 28, 2013 7:53pm EST  --  Report as abuse
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