Sears Canada to re-open Eaton's - seven-outlet upscale retailer - Brief Article

DSN Retailing Today, May 8, 2000 by Jim Fox

New merchandise, infrastructure, corporate identity

TORONTO -- Canada's legendary Eaton's department stores will be reborn in the fall, initially as a seven-outlet upscale retailer operated by Sears Canada.

A confident Paul Walters, chairman and ceo of Sears Canada, stated at the company's annual meeting on April 17 that the new-and-improved Eaton's will be profitable immediately and have sales of $1 billion within three years. After its first full year of operation, he predicted the new Eaton's will have a "positive earnings contribution."

"Our goal is to create a destination shopping experience built around quality, style, choice and personal service," Walters said.

There will be spas, entertainment, food, personal-shopping assistants and brand-name merchandise at the stores in prime downtown locations in Toronto, Ottawa, Winnipeg, Calgary, Vancouver and Victoria, as well as suburban Yorkdale in Toronto. The launch will include the Eaton's brand, a catalogue and Web site.

Sears took over the 130-year-old Eaton's brand name when the empire--almost as old as Canada--died last year after going bankrupt with massive debts at its 64 remaining stores. The venerable chain's inability to keep up with the times, poor family-run management and bad decisions--eliminating many departments such as major appliances, furniture and electronics--were all blamed for its demise. The final blow was the invasion over the past six years of aggressive U.S. retailers such as Wal-Mart.

In its final full year of retailing, The T. Eaton Company had sales of $1.1 billion (U.S.) and losses of $70 million.

Walters explained to shareholders that leveraging the Sears Canada infrastructure, with its financial and systems divisions and buying power, along with sweetheart rents--$1 a year for the next 60 years at both the Toronto Eaton Center and the Vancouver Pacific Center--will greatly help in keeping costs down. In addition, in its deal to buy Eaton's, Sears took over about $500 million in the former chain's net operating losses, which will result in a $200million tax write off.

Sears paid $56 million to take over the Eaton's brand and 19 of its stores, 12 of which are being converted to Sears stores. The initial Eaton's stores will be in urban markets best able to satisfy its high-end strategy (Analysts have pointed to Bloomingdale's as the closest U.S. equivalent in style and merchandise mix.)

Sears will also bring back furniture and electronics--instead of concentrating on fashion--add beauty spas and launch a separate Eaton's credit card. "This is not like Eaton's is 64 stores trying to make it on its own with a strategy that wasn't right for the bulk of its locations," Walters said.

The corporate identity will also change. The design of the name will now feature a small 'e' and no apostrophe before the 's', reflecting "the evolution from a family name to a true brand name," said Rick Sorby, executive vp, marketing at Sears. The corporate color will be aubergine, which is to reflect good taste and high fashion.

"In developing the new logo for Eaton's, we felt it was critical to retain a connection to the store's iconic past, while dramatically bringing it into the new millennium," he said. "The lower-case letters are more contemporary, cleaner and more reflective of the style of the new Internet age."

Sears Canada--owned in majority by Sears, Roebuck & Co. of Chicago--has had 11 consecutive quarters of record revenue and profit. Sales are up by $1.15 billion over three years to $4.1 billion. Its Internet business produced revenues of $15 million last year, which Walters said will rise by $100 million this year.

During his presentation, he showed a video suggesting a ritzy Eaton's chain, and retail consultants agreed: If anyone can relaunch Eaton's and be successful, it would be Sears. It's also been suggested that Sears is considering bringing in some major U.S. retail names, such as FAQ Schwartz, to sell their products in the Canadian stores.

Should Eaton's fail after all this hard work, some analysts suggest Sears could then try to interest a U.S. retailer, perhaps even Bloomingdale's, to take it over.