Sears Canada says its retail business is in a dire state and warns that it has “significant doubt” over the company’s ability to continue to operate.
In its first quarter update, the department store chain said its inability to overcome the challenging retail marketplace and continue with its reinvention plan, which began last year and included a new logo, could force the company to sell or restructure itself.
The company says it has seen some early successes with its reinvention plan, but its financial forecasts indicate it will not have enough cash flow to meet its obligations over the next 12 months.
Its net loss for the first quarter was $144.4 million, more than double during the same period last year. As well, revenues have dropped by approximately $90 million to $505.5 million, representing a decline of 15.2%.
It blames three factors for the most recent losses:
“The Company continues to face a very challenging environment with recurring operating losses and negative cash flows from operating activities in the last five fiscal years, with net losses beginning in 2014,” reads a Sears Canada release.
It had planned on borrowing an additional $175 million to continue its operations, but this has since been reduced to $109 million.
Much of the company’s assets have already been disposed of, leaving little that can be monetized. It has closed many of its stores across the country over the last few years, including its prime locations at CF Pacific Centre in Vancouver, Chinook Centre in Calgary, Rideau Centre in Ottawa, and CF Eaton Centre in Toronto, in an effort to raise money.
Sears Canada’s market share has taken a dive, as it is unable to compete with the growth of not only online retail but also the expansion of other retailers such as Hudson’s Bay and the entry of new major players like Nordstrom and Saks Fifth Avenue.
Earlier this spring, the company launched a new designer off-brand concept called ‘The Cut’, which will eventually be introduced to all 94 stores across the country.
Additionally, it will open 10 new-format stores this summer, adding to the four stores that launched last year.
Last week, Hudson’s Bay Company announced plans to cut 2,000 positions from its North American workforce due to a poor financial performance. The layoffs will save the company $350 million.