By Micki Cowan

After posting a net loss of $48.8 million in their third quarter earnings, Sears Canada is at risk of becoming the next Eaton’s, according to marketing expert Alan Middleton.

The loss is 123 per cent more than what the company lost in the same period in 2012, when it was down $21.9 million in earnings.

“They’re at a pivotal point in their existence,” said Middleton, an assistant marketing professor at York University. “They’re having to sell off major assets in order to continue business.”

Middleton noticed the company was “troubled” back in 2012, but said it’s not yet clear from the financial statements if they are doing anything substantive about it.

He blames the financial struggle on a failure to keep up with online ordering and digital marketing, out-of-date stores and offering too many products and services instead of specializing.

“If we go back 20 years, Sears had one of the best databases and direct marketing operations of any department store. And they’ve just let it slide, where the others have come on strong,” Middleton said.

But he also said their current financial situation is a simple case of bad management.

“All these things look very sensible in the short term – reducing revenue, reducing cost,” he said.

“But you don’t recognize that often a lot of companies, they reduce costs so much that it’s causing an acceleration in the reduction of revenue.” –  Middleton

Sears Canada media representatives said they are unable to comment on their finances until next week due to staff being away.

But in a recent press release, the company said they are “transitioning from a business that has historically focused on running a store network into a business that provides and delivers value by serving its members in the manner most convenient for them: whether in store, in home or through digital devices.”

The transition involves increasing access to a wide assortment of products for members, enhancing member benefits, and making use of data and analytics for targeted sales offers, according to the Jan. 9 release.

Middleton pointed to Hudson’s Bay as an example of a department store that has kept up with the times and been able to handle increased competition from incoming American retailers such as Target and Nordstrom.

He said Sears went wrong by continuing to offer a large amount of products and services, especially specialty goods like appliances.

“Whereas the Bay has gone out of a lot of those products, is focusing on fashion and related products, Sears is still much more an old style department store but with costs higher than specialists like the Brick and Leons can offer,” Middleton said.

In October, Sears announced the future closure of five major stores at the Toronto Eaton Centre, Sherway Gardens, Markville, London-Masonville and at Richmond Centre in B.C.

The third quarter financial statement does not include the $400 million the company received for the termination of the those leases, nor mention what the company plans to do with the money.

The statement did hint more sales may be coming, and mentioned the future closure of its logistics centre in Regina and that the land is now for sale.

“We continue to reduce unprofitable stores as leases expire and in some cases accelerate closings when circumstances dictate,” it said in the release.

Middleton wasn’t convinced the company will try to make a comeback.

“They’re trying to recover now. But as you know they’re selling off stores. The question is how much will they remain active in Canada.” – Middleton

Information on the fourth quarter will be available in February, following the year-end on Feb. 1.

Email: mickicowan@gmail.com
Twitter: @mickicowan

Click on the notes below to see highlighted aspects of the interim report.