Brick and mortar meltdown.
Sears Canada hired the same leading bankruptcy advisory firm on June 12 that had represented Target Canada in its insolvency proceedings. Ten days later, it filed for bankruptcy protection to restructure its capital and its operations, shutter dozens of it 225 stores and lay off nearly 3,000 employees, but planned to continue operating. Today it said that the restructuring efforts failed, and that it would seek court approval to liquidate, shutting all its remaining stores and laying off its remaining 12,000 employees.
Retailers are notoriously difficult to restructure. Once they’re this deep in trouble, after years of losses, they own few assets and are burdened with debts, as everything has been sold or pledged to creditors. Their suppliers, who’ve been burned too many times, are getting skittish. Lenders are getting desperate. And acquirers can be impossible to find. Most retailer bankruptcies start out as restructurings but end as liquidations.
To stay alive while losing money for years, Sears Canada has sold off most of its real estate holdings, and the most valuable assets are already gone. What’s left are C$1.1 billion ($880 million) in liabilities.
“The company deeply regrets this pending outcome and the resulting loss of jobs and store closures,” the company said in the statement.
Pending court approval to begin the liquidation process, Sears Canada said that it would kick off liquidation sales at its stores as soon as October 19 and continue through the holiday selling period.
In the bankruptcy filing in June, the company spoke of its “reinvention” and its “brand reinvention,” how it “rebooted its customer experience and service standards,” and how its “newly designed site built in-house by a new technology team” and some other factors would make this restructuring work.
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