Sears Canada ends Eatons experiment - ending high-end department store business - Brief Article - Statistical Data Included

DSN Retailing Today, March 11, 2002 by Mike Duff

TORONTO -- Sears Canada is exiting the high-end department store business, removing the Eatons banner from the last seven locations where it has flown, and effectively putting to rest the venerable Canadian retail icon.

Sears will close or convert the final seven stores operating under Canada's oldest department store name to its own. Sears Canada purchased Eatons in 1999 for $50 million (C$80 million), converting 12 stores to the Sears banner and keeping seven mainly downtown locations under the Eatons name. After deciding it would continue Eatons, Sears undertook a costly store-renovation project and sought to continue a program the department store pursued in its waning months before bankruptcy, which was designed to shift the chain's emphasis to young, urban Canadians.

According to published reports, Sears Canada spent a total of about C$150 million (US$94 million) on the brand's revival, but the effort was associated with former Sears Canada chief Paul Walters. His replacement, Mark Cohen, subsequently decided to pull the plug. Two Eatons units--one in Toronto's Yorkdale Shopping Centre and one in Winnipeg's Polo Park Shopping Centre--await a decision about whether they or adjoining Sears stores will be closed. The other Eatons locations, in Ottawa, Calgary, Vancouver, Victoria and downtown Toronto, will be converted to Sears by the end of July, according to the company.

"We are focused on near-term retail market weaknesses, as well as longer-term changes in customers spending habits, wants and needs, he said. "These observations, coupled with Eatons' lack of critical mass, suggest that this change should take place now."

Sears Canada will take a one-time pre-tax charge of C$180 million (US$113 million) in the first quarter to cover closings. With Eatons gone, Sears Canada anticipates saving $40 million yearly. During the conference call, the company raised its earnings guidance to $1 per share for the year, one-time charges aside, from $0.86.

One Canadian retail analyst, who spoke on condition of anonymity, said the decision came as something of a surprise, at least regarding the rapid shift in Eatons' prospects as expressed by Sears. "I think it's remarkable that the board approves this 12 months ago and 12 months later wants to shut it down," the analyst said.

The economy may have played a factor, and Walters' leaving as well, the analyst said, but still, Sears Canada has given the appearance of wavering in terms of how it wants to appeal to the high-end shopper.

Now, although the Eatons banner is gone, Sears Canada hasn't altogether given up on upscale assortments. The seven former Eatons stores, along with 13 other larger Sears stores, will convert to a strategy the retailer has dubbed "select," offering customers a broader assortment of better fashion merchandise.

Sears Canada plans to continue providing favored Eatons brands at its namesake stores, while adding merchandise categories to the ex-department stores that generally weren't available. For former Eatons, this includes electronics, major appliances, hardware and mattresses. In the Toronto Eatons Centre and the Vancouver Pacific Centre stores, Sears Canada will add a furniture and appliance store-within-a-store.