Sears Canada could survive bankruptcy but likely not as a department store

Click to play video: 'Sears Canada cutting 2,900 jobs, closing 59 locations across country' Sears Canada cutting 2,900 jobs, closing 59 locations across country
Sears Canada announced Thursday it will close 20 full-line locations, plus 15 Sears Home stores, 10 Sears Outlet stores and 14 Sears Hometown locations – Jun 22, 2017

Bankruptcy may not be the end of Sears Canada. But if a new Sears emerges from the ashes, it will likely look nothing like the retailer Canadians grew up with, experts tell Global News.

READ MORE: Sears Canada slashing about 2,900 jobs, closing 59 locations across country

“I think bankruptcy is [the company’s] only hope to stay in business,” said Maureen Atkinson, senior partner at J.C. Williams Group, a retail adviser.
The fact that the company obtained creditor protection means its debtors will now have “a lot more power” than shareholders, Atkinson added. Debtors have an inherent interest in the retailer stabilizing and being able to repay some of its loans, she added. Shareholders, on the other hand, may have been inclined to “get as much as they [could] out of the company.”
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READ MORE: Here are the 59 Sears Canada stores set to close and where you can expect liquidations

And bankruptcy gives Sears “a window of opportunity to make some fairly bold changes to the business,” said Andrew Dooner, partner at global consultancy KPMG.

WATCH: Can Sears be saved?

Click to play video: 'Can Sears be saved?' Can Sears be saved?
Can Sears be saved? – Jun 14, 2017

So how might the Sears of the future look like?

No longer a department store

It’s unlikely the retailer will be able to survive as a department store.

A more promising approach would be for Sears to focus on what it does best — such as selling appliances and housewares — and become a specialized store with a strong online presence, said Atkinson.

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The old model of the department store that sells everything to everyone is no longer working and may well be headed for extinction, she added.

READ MORE: First Target, now Sears? Why retail jobs will keep disappearing

It’s not just that e-commerce has slammed big-box stores. Middle-of-the-road retailers have also been grappling with the fact that even average-income consumers are increasingly opting for discount stores for much of their shopping while splurging on select luxuries.

That explains why Dollarama is thriving, while the likes of Sears are not.

READ MORE: Canada’s economy is chugging along, so why are so many people shopping at Dollarama?

“There’s this notion of a hollowing out of the middle,” said Dooner. On the one hand, consumers are only willing to shell out for coveted brand names, on the other hand, they will opt for hard discounters like Walmart for everyday necessities, he added.

That eats at departments store profits from both ends, he noted.

A much smaller Sears

And whatever Sears emerges from bankruptcy, it will likely have a much smaller footprint across Canada, according to Dooner.

The company has already announced 59 store closings across the country.

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But going forward, it may have to make more hard decisions about which stores it should bet on.

“The business that Sears is today is dramatically smaller than it was five to seven years ago but short of a few stores that they’ve sold, the physical footprint that they occupy … is still very much the same size than it was five to 10 years ago,” Dooner noted.

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