Sears Canada said Tuesday there is "significant doubt" about its future and it could sell or restructure itself, the latest sign of how the retail sector is being upended by the rise of online shopping.
The retailer, known for catalogues that were a staple in the homes of generations of Canadians, saw its shares plummet by 39 per cent to 70 cents on the Toronto Stock Exchange minutes after the opening bell.
It said based on its current assessment, cash and forecast cash flows from operations are not expected to be enough to meet its obligations over the next 12 months.
Back in January, Sears announced it would close its Timmins store in July.
The company has locations across Northern Ontario; including North Bay, Sault Ste. Marie, Sudbury and Timmins.
Shoppers at the Sears store in the Northgate Mall in North Bay are startled to hear that Sears is in financial trouble.
They told CTV they would miss it if the company were to go under.
"It’s been part of Canada for a very long time so it would be a shame if they had to sell, especially if it went to a company that wasn't Canadian.”
The announcement came as Sears Canada reported a first-quarter loss of $144.4 million, more than double what it was a year ago, and a 15.2 per cent decline in revenue.
Sears Canada said it had expected to be able to borrow $175 million, but that has been reduced to about $109 million. It said it also lacks other assets, such as real estate, that can be monetized in a timely manner.
"Accordingly, such conditions raise significant doubt as to the company's ability to continue as a going concern," it said.
While there were improvements in sales at its stores, revenue fell by about $90 million to $505.5 million due to a drop in its catalogue and online sales.
Sears Canada also postponed its annual meeting, which had been scheduled for Wednesday, until an unspecified date.
According to its 2016 annual report, the company had 95 department stores, 26 Sears Home locations and 14 outlets.
Nipissing University business professor Siva Prasad Ravi said the news doesn't come as a surprise and he added there are a few reasons why the company is struggling.
“It’s all about their strategy,” he said.
“Online shopping and more importantly, Sears not transforming their shop, not transforming their business model to a model that is needed today.”
In North Bay, the company employs 80 to 100 staff, according to a store manager.
And Sears Canada said 'it's business as usual at our Northgate location and we look forward to continuing to serve the customers of North Bay and the region now and in the future'.
While there were improvements in sales at its stores, revenue fell by about $90 million to $505.5 million due to a drop in its catalogue and online sales.
Sears Canada also postponed its annual meeting, which had been scheduled for Wednesday, until an unspecified date.
According to its 2016 annual report, the company had 95 department stores, 26 Sears Home locations and 14 outlets.
Business analysts said one problem Sears is facing is that it serves neither the high end nor the low end of the consumer scale.
They said lower end companies are doing well, and so are those who sell to high end customers.
Sears they say is lost in the middle.
with files from the Canadian Press
