Sears Canada report intensifies fears N.B. will lose hundreds of jobs
Word that Sears Canada is on the brink of filing for creditor protection has thrown more doubt on the future of hundreds of jobs in New Brunswick.
These include the 418 people who work in the four retail stores and 22 merchandise pickup locations, as well as the 540 jobs that were supposed to materialize at two new call centres in Edmundston and Saint John.
The company announced in March that its future is in doubt after losing more than $2 billion last year and seeing its shares hit an all-time low in February.
Earlier this month, the company acknowledged concerns about its ability to continue operating and said it might have to restructure or be sold.
Retail experts saw it coming
Retail experts who were questioning January's announcement by the New Brunswick government that it was going to support the creation of two new Sears call centres, say their fears about the longevity of that plan have been amplified or confirmed.
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"I was happy for the people out in New Brunswick, but at the same time I was skeptical that it would come to fruition because many pundits in the industry, for the past two years, have really been waiting for this day to happen," said Bruce Winder, co-founder of Retail Advisors Network in Toronto.
"We all knew it was a matter of time before Sears ended up where it is today."
Maureen Atkinson, senior partner with J.C. Williams Group, said she expressed a polite optimism when reporters asked for her reaction to the call centre announcement because she had concerns about the company's inability to overcome previous challenges.
On Wednesday, Atkinson said filing for creditor protection might actually help the company find a way to stay alive by enabling it to reorganize and take steps such as breaking leases, if necessary.
"It's not good but it's not the end," she said. "Companies can go into creditor protection and come out stronger."
Consumer confidence shaken
Atkinson said suppliers have probably stopped shipping to Sears unless it's cash on delivery.
She said Sears was especially strong in the area of home appliances, and in that line of business, she said, shoppers want to know that their retailer is going to stick around.
"And it seems to me they're not in a position to make a long-term commitment to their customers." she said.
Winder said the increasing uncertainty about Sears' future, can't be good for short-term sales.
"You're not going to buy something from a company that might not be around because you're concerned about your warranty, you're concerned about servicing," he said.
"And if you're just shopping around, you're going to wait to see if in fact they liquidate their inventory and wait until that inventory is 70 percent, 80 percent off before you buy anything."
What happens to workers?
When Target Canada anticipated its liquidation in 2015, it created a $90 million employee fund, established by the retailer's parent company in the U.S. to ensure all laid-off workers got 16 weeks of termination pay.
"That was entirely voluntary," said Toronto insolvency lawyer David Ullman, partner at Blaney McMurtry LLP.
"There is no requirement in Canadian law for a company to create a trust of that kind."
Ullman added that it would be unusual for a company to do so.
"In order to do so, it has to have a solid entity connected to it in some way, which again in the case of Target was the Target US entity," he said.
"For example, a company can't do that with its own money because you can't establish a trust for one group of creditors when all your creditors are supposed to be treated equally."
UIlman said the federal Wage Earner Protection Program Act does ensure that employees whose business ends up in a receivership or a bankruptcy are entitled to protection for their outstanding wages up to a total of approximately $3,500.
"That usually means that people don't end up out of pocket, if they have a regular weekly paycheque and if the company abruptly stops operating."
But Ullman said there is no similar protection for severance pay or pensions.
"That's where the employees lose out, is on long term benefits or seniority benefits," he said.
Customers will miss stores
Customers, such as life-long Sears shoppers Robin and Wanda McFarlane are also wondering where they'll take their business if the Sears store in Saint John evaporates from the 135,000 square feet it occupies as the anchor tenant of McAllister Place.
"I guess we'd have to find another store," said Wanda McFarlane.
"I don't know. I don't know. We'll just have to shop somewhere else I guess, like everybody else."
"Pretty sad," added her husband, Robin. "A big company like that and they've got to file bankruptcy. We'll miss Sears that's for sure."
