Shares of Sears Canada Inc. (TSX:SCC) are down almost 24% after the company announced it has “significant doubt” as to whether or not it will be able to stay in business.
In a June 13 press release announcing its 2017 Q1 results, the company said it is having cash flow issues and had expected to stay liquid by borrowing an additional $175 million secured against its owned and leased real estate; however, the company said it appears it is only able to borrow $109 million, which is not enough for the company to meet its obligations over the next 12 months.
Because of this and “the lack of available alternative sources of liquidity – through real estate monetizations, asset sales or otherwise – which may not be available in a timely manner, mean there are material uncertainties as to the company’s ability to continue to satisfy its obligations and implement its business plan in the ordinary course,” Sears said in the release.
The retailer’s future is uncertain, but the company said it is still going ahead with the planned conversion of some of its locations to a new “concept” called Sears 2.0. These stores will have different layouts and inventory compared with the chain’s traditional locations. Sears said it converted four locations last year and will have 10 more stores converted to the new format between June and August this year, bringing the total to 14 by the end of fiscal 2017.
Revenue was $505.5 million in Q1, down 15.2% compared with the same period last year. Sears said the drop was due in part to a planned reduction in catalogues due to lower customer demand. Same-store sales increased 2.9% year-over-year.
The company has been struggling since October 2013 when it announced the closure of five locations across Canada, including the Richmond Centre location.
@EmmaHampelBIV
