Embattled Sears Canada sees losses jump

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Sears Canada Inc., whose U.S. parent has put it up for sale, saw its first-quarter loss more than double and revenue decline as the embattled retailer absorbed the impact of unseasonably cold weather.

But Sears Canada president and chief executive officer Douglas Campbell says the quarter also included an encouraging performance in the fashion basics segment. And he says his management team isn't bothered by the uncertainty over the possible sale of the chain.

"Our new spring apparel line was strong in the quarter," Mr. Campbell said on Wednesday after the release of first-quarter results.

Sears Canada is counting on continued growth in its low-cost, high-margin private label offerings to help boost sales in the remainder of the year, he said. "Putting our strengths and efforts behind that category is pretty important," Mr. Campbell said.

"At the same time, we have continued to focus on maintaining our leadership in major appliances."

Sears Canada's iconic Kenmore home appliances, as well as its Craftsman tools, continue to play a major role as popular brands attracting customers into the stores. The company would likely have to negotiate a licensing agreement for use of the brand names if Edward Lampert, the U.S. hedge fund manager who heads parent Sears Holdings Corp., decided to sell them, Mr. Campbell said.

For the first quarter, Sears Canada said it posted a net loss of $75.2-million or 74 cents per share, compared with a loss of $31.2-million or 31 cents in the year-earlier period. Revenue for the 13-week period ended May 3 was $771.7-million, off 11 per cent from $867.1-million.

Same-store sales – stores open for at least a year, an important retailing metric – declined by 7.6 per cent in the quarter.

Store closings also had an impact on revenue, the company said. Included in the net loss were pretax transformation expenses of $7.6-million related mostly to severance costs as well as lease exit costs and costs associated to the future settlement of retirement benefits of $11.2-million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter was a loss of $58.1-million, compared with a loss of $9.8-million a year earlier.

Management remains focused on a major revamping of the merchandising system and order management platform as well as on cost-cutting, said Mr. Campbell, who took over from his predecessor last fall. "I wouldn't anticipate [the parent company's strategic review, including the possible sale of its 51-per-cent stake in Sears Canada] to be a big distraction," he said.

"We have to get the operational efficiencies of the business right."

Mr. Campbell also challenged the perception that Sears Holdings has already sold many of Sears Canada's best real estate assets, such as store leases at Toronto Eaton Centre and Vancouver's Pacific Centre, making the chain less attractive to would-be buyers.

"We're still in over 100 locations in Canada. We still have not only a number of urban locations but many locations that are of high value."