Sears Canada Q2 revenue falls 9.6 per cent; deal to vacate stores offsets loss

TORONTO – Sears Canada’s second-quarter revenue was down 9.6 per cent from the same time last year, and it would have lost money except for a one-time deal, but the struggling national retailer says its transformation plan is beginning to pay off.

The national retailer’s overall revenue for the 13 weeks ended Aug. 3 was $960.1 million, down from $1.06 billion a year earlier.

Part of the revenue decline was a reduced number of locations but same-store sales were also down 2.5 per cent.

Sears would have posted an $11-million loss during the quarter except for an agreement to vacate two Toronto-area stores by next March.

Sears Canada (TSX:SCC), a publicly traded subsidiary of Sears Holdings Corp., reported Wednesday that its net income was $152.8 million or $1.50 per share, including an after-tax gain of $164.0 million.

Excluding the one-time gain related to giving up leases at two to three stores in Toronto and Mississauga, Sears would lost 11 cents per share. Its loss a year earlier was $9.8 million or 10 cents per share.

On Tuesday, Sears said it is cutting 245 jobs, mostly at its head office in Toronto, and moving some of the work overseas. The reductions will affect 138 of the jobs in its information technology department, 99 in finance and eight in payroll.

Sears Canada let go 700 workers across the country earlier this year in a bid to “right-size” and restructure its business. About 360 of those jobs were from its department stores, and another 300 from the distribution centres. The remaining cuts were to head office and other support areas.

“This period marks the half-way point of our three-year Transformation plan, and although we have much work to do, we are starting to see progress, thanks in large part to our 29,000 associates coast to coast who are continuing to plan and execute strategies that are designed to drive increased consideration for Sears as a shopping destination of choice for Canadian families,” Sears Canada CEO Calvin McDonald said Wednesday in the second-quarter earnings report.

“The success we are seeing in the merchandise categories where we have focused most of our transformation efforts continues to be an indication that Canadians are responding positively to the changes they are seeing at Sears.”

McDonald emphasized the results from its apparel and accessories business, although that was offset by decline in its home and hardlines business — especially home furnishings, mattresses and home electronics.

“On a broader basis, we reduced total expenses by 10.3 per cent in the second quarter this year versus the second quarter last year, as management continues to adjust to revenue trends,” McDonald said.

About 200 of the latest cuts at Sears are in the Toronto area, 38 are in Montreal and six in Belleville, Ont.

Sears said the workload will be transferred to “external third-party providers whose business expertise includes updated systems and processes that can more efficiently perform the work involved.”

While the company didn’t provide a specific breakdown on how the work will be re-assigned, spokesman Vincent Power said a “contingent of workers” will be in Canada while the majority of the IT work is expected to be done in the Philippines and the majority of the finance and payroll work in India.

Employees were notified of the cuts Monday and will leave during the next three to six months.