Sears Canada Inc. announced that it will terminate its leases in respect of five stores for a total consideration of $400 million. The agreement is definitive and only subject to customary closing conditions. The transaction is expected to close on or around November 12, 2013.
Four of the five stores are owned by The Cadillac Fairview Corporation Limited (Cadillac Fairview) and are located in Ontario: Toronto Eaton Centre, Sherway Gardens, Markville Shopping Centre and London-Masonville Place. The fifth store is located at Richmond Centre in British Columbia and co-owned by Ivanhoé Cambridge and Cadillac Fairview. The transaction requires Sears to vacate the Toronto Eaton Centre, Sherway Gardens and London-Masonville stores by February 28, 2014 and Markville and Richmond by February 28, 2015.
The Company will retain the upper four full floors of the Toronto Eaton Centre to conduct its head office operations from that location.
There are currently 965 associates located in these five store locations. The associates whose employment could be potentially affected by this transaction will have the opportunity to apply for positions for which they are qualified in other Sears locations which could become available during the transition period.
"Unlocking the value of assets is one of the three levers we have said we will use as a way to create total value for the Company," said Doug Campbell, President and Chief Executive Officer, Sears Canada Inc. "When proposals such as this one are presented to us, we must weigh the value of the transaction against the value we will obtain from continuing to operate those stores in their current locations.
"In this case, we were presented with an opportunity that gives us a significant financial benefit without changing our plans to improve the business and make Sears more relevant to Canadians. Our primary focus of creating long-term value for the Company is best approached by focusing on the basics of the business and continuing to become more relevant with Canadian consumers coast to coast.
"The Company will operate 111 full-line department stores after Sears vacates these five stores," continued Mr. Campbell, "which continues to be a substantial retail presence across Canada, especially in suburban and mid-size markets where Sears plays a major role in the marketplace.
"We will continue to focus also on the two other levers we use to create total value: the retail value lever, where our focus is on growing same-store sales profitably by implementing the right customer value proposition, and the cost/efficiency value lever, where our focus is to keep the expenses and structure of the organization in line with the needs and size of the business we are operating."
Mr. Campbell added, "I want to acknowledge the effect that this announcement will have on our Sears associates. I appreciate the service they have given to Sears, and I thank them in advance for their assistance during the transition period ahead of us."
Sears has operated in London-Masonville since 1985, in Richmond Centre since 1989, in Markville since 1991, and in Sherway Gardens and the Toronto Eaton Centre since 2000.
Sears Canada is a multi-channel retailer with a network that includes 181 corporate stores, 246 hometown dealer stores, over 1,400 catalogue merchandise pick-up locations, 101 Sears Travel offices and a nationwide home maintenance, repair, and installation network.
