Sears Canada Inc. (TSX:SCC) is an established multi-channel retailer that, like many of the traditional brick and mortar retailers, suffers from not being able to transition from a physical retailer to one where an online market plays an increasingly larger role in total sales.
Over the past year Sears Canada has been attempting to undergo a radical shift, but dwindling sales and frequent executive-level changes have left the company in a confused limbo.
Sears Canada’s problems are compounding
Sears Canada has been plagued with a number of issues over the past few years, all of which are compounding by the quarter. Declining store traffic, a diminishing brand, and establishing an online shopping experience are just a few of the core problems the retailer faces.
Traditional retailers such as Sears have long struggled to adopt a digital sales strategy or even an online presence, preferring large physical stores and anchor tenant locations, which have reported declining traffic for the past few years.
Part of that problem is management turnover (or lack of it). Traditional retailers often have what the industry calls “lifers” at the helm and in key positions of leadership. Lifers can keep a business steady and know the ins and outs of the operation, but are out of touch with how consumer tastes have evolve in an increasingly digital world, meaning they are hardly in a position to steer the business into new and radical directions, which is what’s needed at Sears Canada at the moment.
Executive Chairman Brandon Stranzi made note of this, referencing Sears as “a mature company with a lot of leadership that had been here for a very, very long period of time…”
Sears Canada president Carrie Kirkman became the latest executive to step down in what has become a revolving door for executives over the past few years. Kirkman stepped down from her post after less than a year on the job, transitioning to an advisory role and continuing to focus on brand-partner development issues.
Frequent senior management changes and shifting titles are a symptom of the type of revamp that Sears Canada is undergoing, but the constant changes are demoralizing for other staff that are expected to keep performing the same duties.
Sears Canada is doing all of the right things, just at the wrong time
Sears is in the midst of a massive transformation, but whether or not the turnaround can still occur is up for debate. Stranzi brought to light some areas to focus on, such as integrating company-wide operations and revamping both the e-commerce and catalogue divisions.
Ironically, Sears’s traditional catalogue business was well ahead of its time and the competition. When the online movement started, Sears’s extensive catalogue experience put the company in a prime position to be a market leader in e-commerce. When Sears failed to capitalize on this or even keep current with the changing needs of technology, sales started to drop.
A new e-commerce platform is in development with a target window to launch in time for the holidays.
Can Sears Canada survive?
Sears Canada is doing everything it can to stay afloat by slashing expenses. Last year, costs were slashed by $125 million, and at least that much is being targeted this year, which, unfortunately, means more store closings and job losses.
This may give the perception to some analysts that the company is winding down operations in a bid to sell and exit the market altogether.
I think this couldn’t be further from the truth.
Sears Canada is in the midst of a transformation from a physical retailer with huge stores to a new model that will likely include fewer, smaller stores and a larger online presence. Sears Canada can’t accomplish this gargantuan task without closing at least some of the stores that are not performing.
Assuming that Sears Canada can emerge sometime next year with a revamped online catalogue and presence that can be marketed adequately, there could be some opportunity to build from there, particularly considering the stock price is already down over 50% just this year.
That being said, there’s still plenty of work that needs to be done in that transition. Until that time, Sears Canada remains a very risky investment. There are far better options in the market at the moment.