Sears Canada swings to profit on real estate deals
Toronto – Real estate transactions helped Sears Canada swing to a profit in the second quarter even as revenue and same-store sales decreased.
The retailer on Wednesday reported net earnings of $13.5 million, compared to a net loss of $21.3 million the same quarter a year earlier. The company, which has been working to turn around its business, also announced additional cost-cutting plans and real-estate sales.
Sears Canada’s second quarter earnings included the net proceeds of the sale and leaseback of three properties in British Columbia and Alberta, as well as the sale of Sears Canada’s interest in some joint real estate agreements and the settlement of some retirement benefits. Sears Canada also announced it will sell a warehouse and non-mall store property for an additional $28 million. Both sales are expected to close in the fourth quarter.
Revenue dropped 9% to $768.8 million, from $844.4 million. Same-store sales dropped 3.9% across all channels and 1% in core retail stores.
Looking ahead, Sears Canada plans to open 200 vendor-branded shop-in-shops from 12 vendors in its stores, mostly by November 2015 in time for holiday sales. Brands will include Dockers, Haggar, Levi’s and Van Heusen.
In addition, Sears Canada is implementing a cost reduction program that will reduce recurring operating expenses by $100 million to $125 million, compared to fiscal 2014. Most initiatives will be implemented in the third quarter and incur one-time costs of $15 million to $20 million.
It has also agreed to sell more noncore, non-mall real estate properties and said it would continue to look at other potential real estate sales.
"In all, I am very pleased with the positive momentum we are now seeing in the business and I am confident that Sears Canada is back on the right track, focused on creating value for our shareholders, instilling a sense of pride in our employees, and providing Canadians with an outstanding retail experience," said Brandon G. Stranzl, executive chairman.