In Sears Canada’s Demise, a Hint of Things to Come in the US

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Sears Canada went into a liquidation process that will end the retailer’s presence in Canada. Several estimates put the number of people who will lose jobs at 12,000. The news is a sign of what is likely to happen to more than one retailer in the United States — an entire demise.

The company announced:

 Sears Canada Inc. today announced that it and certain of its subsidiaries (the “Sears Canada Group”) will be applying to the Ontario Superior Court of Justice (Commercial List) for approval to liquidate all of its remaining stores and assets. It is expected the Court will hear the motion on October 13, 2017. Pending approval of the Court, it is expected that liquidation sales at retail locations would commence no earlier than October 19 and continue for 10 to 14 weeks.

In June, credit research firm Moody’s provided a list of retailers that could fall into Chapter 11. Of course, these actions might cut debt enough so that some of the stores run by the companies might survive. Nevertheless, they would need to downsize at unprecedented rates and might not be able to remain open at all. These included Bon-Ton, Claire’s, Gymboree, Neiman Marcus and the U.S. operations of Sears.

The litmus test for these retailers may be the 2017 holiday season. Many retailers make all their profits in the fourth quarter, and some post 40% of their sales in the period. One thing that the troubled retailers have in common is a lack of a powerful position online, where retail sales are increasing at a rate unimaginable just a few years ago.

Retailers that have modest or less than modest sales in the fourth quarter will further drain their already crippled financials. Like Sears Canada, that will spell the end of them in 2018.