Sears Canada 2.0: The re-engineering begins
A broad slate of initiatives unveiled by Sears Canada are intended to transition the company from a business stabilization phase in 2015 to a re-engineering phase designed to restore growth.
Sears Canada operates a network of 159 corporate stores, 125 Hometown stores, more than 1,200 catalog and online merchandise pick-up locations, 84 Sears Travel offices and a nationwide repair and service network. Revenues from the enterprise declined 8.7% to $887.6 million (Canadian dollars) due to some store closures and a 1.6% decline in same store sales, much better than the 9.1% comp decline in the fourth quarter the prior year. The company reported an operating loss adjusted to exclude non-recurring gains and expenses of $1.2 million compared to a prior year loss of $28.8 million.
Full year sales of $3.145 billion reflected a comp decline of 2.3%, a less severe drop than the prior year decrease of 8.3%.
During 2015, Sears Canada said it focused on the three key business stabilization initiatives of increasing revenue, operating profitably and maintaining a strong balance sheet. For example, Sears store in Canada are rolling out a concept called “shop-in-shops,” essentially branded departments within the store. During the fourth quarter, 51 additional shop-in-shops were installed, bringing the total shop-in-shops completed in 2015 to 191 shops from national brands, plus another 25 shop-in-shops supporting Sears Canada's private brands.
The merchandising effort is yielding results with the top performing brands boosting sales per square foot as much as 36% with a 19% improvement in gross margins and 92% better inventory turns, when compared to the overall merchandise category averages across the company.
In the media planning and marketing area, Sear Canada said it employed a more data driven approach during the holidays and given its success the approach will be expanded this year.
The retailer also began a new in-store merchandising initiative called "Pinball," which focuses on setting stronger merchandise presentation standards. Pinball was implemented in selected areas of women's apparel in a handful of test stores and drove an increase in excess of 10% compared to a control group of stores.
During 2016, Sears Canada said plans to undertake a complete re-engineering of its business. Among other potential areas, the re-engineering will include:
• Integration of the more data-driven media planning and marketing strategies to the full-year marketing programs.
• Restructured assortment architecture with more focus on the integrity of Sears Canada's price to value design, and simplified choices.
• Shift in the balance of sale in a large group of stores to be more relevant to a broader segment of the Canadian population, with a subset of these stores iterating forward to pilot a Sears Canada 2.0 concept that will highlight the new assortment architecture as well as innovative real estate development ideas
• Execution of a new store operations playbook focused on the execution of operating tactics to drive four key performance indicators of sales per square foot, margins, labor costs, and inventory turns.
• Conversion programs to drive Home Store customers to full-line stores, and catalog customers online.
• Re-engineering of Sears Canada's catalog to include a focus on key items, upgraded paper, modernized photography, and layouts that will follow merchandise presentation standards similar to "Pinball".
• The enabling of financing capabilities for Sears Canada customers purchasing large ticket items, through a new agreement with easyfinancial Services Inc.