Insolvent Sears Canada Inc. has got court protection from its creditors in a last-ditch effort to slim down and shape up after years-long attempts to transform its business, leaving industry insiders now questioning the retailer's long-term viability.

The money-losing retailer is preparing to close 59 of its 255 stores – including 20 of its 94 large department stores – and let go 2,900 of its 17,000 employees in its bid to continue operating and possibly sell the business.

And it asked Ontario Superior Court on Thursday to allow it to get out of contributing to its underfunded pension plan and retiree medical and dental benefits.

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But retail experts already are raising doubts about whether Sears's plan is sustainable in a fast-changing retail landscape in which traditional players feel the heat from emerging e-commerce and other more nimble, low-cost rivals.

"I know Sears is trying to make a go of it and I wish them the best, but I don't have a lot of faith that it's going to survive," said Patrick Sullivan, chief operating officer of landlord Primaris REIT, which operates nine Sears stores, two of which are slated to close.

"I think we're all in the same boat – we've just been waiting for this to happen for years. Now is this the start of the end or is this really the start of a miraculous turnaround?"

Full list of Sears locations to be closed Sears Full-Line Hometown Outlet Sears Home Medicine Hat, Alta. Cold Lake, Alta. Abbotsford Retail, B.C. Calgary, Alta. Grande Prairie, Alta. St. Albert, Alta. Winnipeg Garden City, Man. Edmonton Skyview, Alta. Lloydminster, Alta. Okotoks, Alta. Halifax Outlet, N.S. Ancaster, Ont. Red Deer Relocation, Alta. Spruce Grove, Alta. Cornwall, Ont. Woodbridge, Ont. Kamloops Aberdeen Mall, B.C. Ft. McMurray, Alta. Chatham, Ont. London, Ont. Bathurst, N.B. Leduc, Alta. Cambridge, Ont. Scarborough, Ont. Saint John, N.B. Sherwood Park, Alta. Timmins, Ont. Kingston, Ont. Corner Brook, Nfld. Creston, B.C. St. Eustache, Que. Ottawa East, Ont. Truro Mall, N.S. Sechelt, B.C. Montreal Place Vertu, Que. Sudbury, Ont. Dartmouth, N.S. Grand Forks, B.C. Sorel, Que. Windsor, Ont. Brockville, Ont. Orangeville, Ont. Orillia, Ont. Sault Ste. Marie, Ont. Rimouski, Que. St. Bruno, Que. Hull, Que. Rouyn-Noranda, Que. Laval, Que. Chicoutimi, Que. Melville, Sask. Quebec City, Que. St. Georges de Beauce, Que. Ste. Foy, Que. Alma, Que. Drummondville, Que. Regina, Sask. Moose Jaw, Sask. Prince Albert, Sask. Source: Company

Sears has dealt with declining financial results as it's been pummelled for years by ever-changing retail trends and leadership switches. Now it's betting on a reinvention that focuses on discounted designer fashion lines, affordable private labels and a revamped digital playbook even as many critics warn the plan is too little, too late.

"It's a very challenging environment right now," said Alex Arifuzzaman, a partner at retail real estate specialist InterStratics Consultants. "I don't see how they can flip over and become an innovative superstar overnight. It's going to be tough. The Sears that was around yesterday is gone forever."

Added Amanda Bourlier, senior research analyst at Euromonitor International: "It is too little too late for Sears Canada as a department store."

Sears shoppers lament decline of department stores 'I like department stores. I like their policies. You can always bring [purchases] back.'

But there is still some hope that Sears's effort in the past six months to become a more focused fashion and home-decor specialist "can resonate and the company can emerge as a leaner, more technology-focused company," she added. " Still, it would have been much easier to start this transition a few years ago."



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And Sears's goal to find one or more buyers for its business or real estate comes after years of it having sold its most attractive assets, including leases to its best-located stores.

Potential suitors have already kicked the tires and, while a few may bite if the price is low enough, the pickings may be slim, Mr. Arifuzzaman said.

Landlords will be faced with vacant Sears stores even as they still grapple with empty Target outlets more than two years after that U.S. retailer closed all 133 of its stores in Canada after getting court protection from creditors in early 2015.

On Thursday Sears lawyers asked the court to shield it from creditors so it could "continue operating as a going concern as it pursues restructuring options including reorganization and a potential sale of the business in order to maximize enterprise value," court documents say.

It got protection for at least 30 days under the Companies' Creditors Arrangement Act.

Sears's executives "need to complete their operational restructuring in a stable environment that will allow them to preserve the going-concern value of their business and deal with the claims that will arise from the last phase of their restructuring," court documents say.

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The various Sears divisions "are facing a looming liquidity crisis and will be unable to meet their obligations as they become due without court protection."

Sears Canada secured up to about $450-million of crucial debtor-in-possession (DIP) financing from its two existing lenders in two interim financing facilities, court documents say. The lenders got "a super-priority charge" on all of Sears's assets and property. Sears had scrambled this week to secure the DIP financing, without which it would have been forced to shut down.

Sears also developed a "key employment retention plan" to keep senior manager and other critical staff in place for the restructuring and ensure "they are properly compensated," the filing says.





The decline of Sears Canada Company’s market capitalization, in millions Company’s market capitalization, in millions $3,500 3,000 2,500 1 2 2,000 5 1,500 4 1,000 3 6 500 7 0 2015 2009 2011 2013 1. Feb. 2009: Sears cuts 300 jobs, less than 1 per cent of its work force at the time, to prepare for a “tough” year in retail. 2. June 2011: Calvin McDonald named president and CEO. Company embarks on a three-year turnaround plan as sales decline and thousands of jobs are cut. 3. 2012: Sears begins selling off leases to its stores in prime locations. 4. Sept. 2013: Mr. McDonald abruptly steps down. Former U.S. naval aviator and retail consultant Douglas C. Campbell takes over as CEO. 5. Sept. 2014: Mr. Campbell steps down as CEO, citing family matters. The following month, Ronald Boire steps in. 6. July 2015: Brandon Stranzl is named executive chairman of Sears Canada. Mr. Boire steps down as CEO the following month. 7. June 2017: The company gets court protection from its creditors and announces it will close 59 stores and let go roughly 2,900 of its 17,000 employees. THE GLOBE AND MAIL, SOURCE: BLOOMBERG, CP The decline of Sears Canada Company’s market capitalization, in millions Company’s market capitalization, in millions $3,500 3,000 2,500 1 2 2,000 5 6 1,500 4 1,000 3 7 500 9 8 0 2009 2011 2013 2015 1. Feb. 2009: Sears cuts 300 jobs, less than 1 per cent of its work force at the time, to prepare for a “tough” year in retail. 2. June 2011: Calvin McDonald named president and CEO. Company embarks on a three-year turnaround plan as sales decline and thousands of jobs are cut. 3. 2012: Sears begins selling off leases to its stores in prime locations. 4. Sept. 2013: Mr. McDonald abruptly steps down. Former U.S. naval aviator and retail consultant Douglas C. Campbell takes over as CEO. 5. May 2014: U.S. parent company Sears Holdings Corp. hints that it’s looking to sell the ailing retailer. 6. Sept. 2014: Mr. Campbell steps down as CEO, citing family matters. The following month, Ronald Boire steps in. 7. July 2015: Brandon Stranzl is named executive chairman of Sears Canada. Mr. Boire steps down as CEO the following month. 8. July 2016: Sears Canada president Carrie Kirkman leaves less than a year after being in the position. 9. June 2017: The company gets court protection from its creditors and announces it will close 59 stores and let go roughly 2,900 of its 17,000 employees. THE GLOBE AND MAIL, SOURCE: BLOOMBERG, CP The decline of Sears Canada Company’s market capitalization, in millions $3,500 3,000 2,500 1 2 2,000 5 6 1,500 4 1,000 3 7 500 9 8 0 2009 2011 2013 2015 1. Feb. 2009: Sears cuts 300 jobs, less than 1 per cent of its work force at the time, to prepare for a “tough” year in retail. 2. June 2011: Calvin McDonald named president and CEO. Company embarks on a three-year turnaround plan as sales decline and thousands of jobs are cut. 3. 2012: Sears begins selling off leases to its stores in prime locations. 4. Sept. 2013: Mr. McDonald abruptly steps down. Former U.S. naval aviator and retail consultant Douglas C. Campbell takes over as CEO. 5. May 2014: U.S. parent company Sears Holdings Corp. hints that it’s looking to sell the ailing retailer. 6. Sept. 2014: Mr. Campbell steps down as CEO, citing family matters. The following month, Ronald Boire steps in. 7. July 2015: Brandon Stranzl is named executive chairman of Sears Canada. Mr. Boire steps down as CEO the following month. 8. July 2016: Sears Canada president Carrie Kirkman leaves less than a year after being in the position. 9. June 2017: The company gets court protection from its creditors and announces it will close 59 stores and let go roughly 2,900 of its 17,000 employees. THE GLOBE AND MAIL, SOURCE: BLOOMBERG, CP

Despite its poor results over the past years, Sears has managed to increase its same-store sales in each of its last two quarters under its new strategy, the company said. "Sears Canada believes this indicates that the new brand positioning is starting to resonate with consumers," it said.

As of April 29, Sears Canada had total liabilities of $1.108-billion and total assets of $1.187-billion, filings say.

Sears plans soon to ask the court for approval to stop making monthly special payments under the defined benefit (DB) portion of its pension plan, Billy Wong, chief financial officer of Sears Canada, says in a filing. It "can no longer afford to make these special payments in respect to the DB component of the Sears pension plan as it attempts to restructure under the CCAA."

Up until now, Sears has paid all its pension contributions, he says.

The wind-up deficit of Sears's DB plan is $266,805,000, the filings indicate. To make it up, the retailer would need to make special payments of $3.7-million a month, the filing indicates. Meanwhile. Sears's post-retirement benefit liability is $196-million, with payments so far having been made through a surplus in the fund.

"The Sears Canada Group is entering these proceedings with the intention of emerging as a stronger, more focused competitor in the Canadian retail industry," Mr. Wong said. "It plans to continue to operate a large number of stores, maintain significant employment, and service its customers across Canada."

To do this, it needs to "right-size its business," close 59 stores, cut 2,900 jobs, reduce costs further and exit some lines of business, including ones that Sears is known for, such as tools.

Sears "has experienced many years of declining sales and significant losses, with net losses beginning in 2014," he said.

He attributes the decline on the overall weakening of traditional Canadian retailing; "unsustainable fixed costs from an overly broad footprint;" the decline of its catalogue business; lower than expected conversion of catalogue customers to online customers; the 2015 termination of its agreement with JPMorgan Chase & Co. to manage its credit and financial services operations; and the weakening of the Canadian dollar.

Last week, Sears signalled it was in trouble when releasing its generally disappointing first-quarter results. It said at the time that its financial situation raises "significant doubt as to the company's ability to continue as a going concern."

Its first-quarter loss more than doubled to $144.4-million from $63.6-million a year earlier while sales skidded 15.2 per cent to $505.5-million.

The court appointed as monitor FTI Consulting Canada Inc. to oversee the restructuring.

The initial CCAA court order does not apply to Sears Canada's pension assets that have previously been contributed to the pension plan, the company said.

Sears Canada had hired BMO Nesbitt Burns as its financial adviser and Osler Hoskin & Harcourt LLP as its legal counsel. The board of directors has retained Bennett Jones LLP as its law firm.

Edward Lampert, CEO of Sears Holdings Corp., has been a key beneficiary of Sears Canada's asset sales over the years through his hedge fund, ESL Investments Inc., and other related firms, which together owned about 45 per cent of Sears Canada at the end of April. Sears Holdings owns roughly 12 per cent of Sears Canada.