Sears Canada may be over, but the mudslinging over who brought it down has just begun.
Majority shareholder Eddie Lampert fired the latest shot in a blog on Sunday. If Sears Canada had adopted a less risky reinvention strategy, it could have avoided shutting its doors, claimed Lampert, who is also CEO of Sears Holdings Corp. in the U.S.
Lampert took particular aim at “Sears 2.0,” an ambitious reinvention plan unveiled in 2016 under the direction of then Sears Canada executive chair Brandon Stranzl. He took charge in 2015, after Sears had gone through three heads in just four years, all tasked with reviving the struggling company.
During Stranzl’s reign, Sears spent big money to modernize stores, update its online shopping site and develop millennial-focused products and fashion lines.
Sears Canada’s reinvention strategy included sleeker, modernized stores and a new logo. (Jeannie Lee/CBC)
The retailer had been in decline since the 2008 economic downturn, but the 2.0 plan drove the final nail in its coffin, according to Lampert and his hedge fund firm ESL Partners, which owns 45 per cent of Sears Canada.
“ESL disagreed with the aggressive and risky strategy to stimulate sales growth known as ‘Sears 2.0,'” wrote the billionaire Lampert. He said that his firm advised Sears against borrowing money to finance an “untested strategy” that was “unlikely to succeed.”
Nevertheless, management went ahead with its plan and “the company’s operating losses and cash drain rapidly worsened,” Lampert said.
He claims that Sears’ demise “was not a foregone conclusion and that a less risky strategy” could have saved the iconic retail chain.
Becoming Winners ‘overnight’
Armance Bartold, a former Toronto-based vice-president of planning for Sears, agrees the reinvention strategy only helped drive the company into the ground.
She says Sears’ plan was to turn itself into a discount retailer like Winners and Homesense and it made the mistake of trying to do it “overnight.”
“It was basically tearing down everything we had and rebuilding it to look like Winners and Homesense,” said Bartold.
“The problem is, Winners and Homesense did it over a 15-, 16-year period.”
Former Sears Canada executive chair Brandon Stranzl will hold a news conference later this week to address the retailer’s demise. (CBC)
CBC News reached out to both Sears Canada and Stranzl for comment.
Sears Canada did not respond and a spokesperson for Stranzl told us he would be holding a news conference later this week.
But in emails sent to Sears employees during his time as chair, Stranzl expressed optimism and enthusiasm for his reinvention plan, even when Sears became insolvent in June and announced it was shutting down 58 stores.
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“If we want it to be a successful retailer for years to come, we need to expedite the pace and intensity of our reinvention — that’s why we took this course of action,” he told employees in an email that month.
Sears Canada finally bit the dust when it rejected Stranzl’s bid to buy the retailer and keep it open. In his blog, Lampert said he didn’t join the bid partly because he believed it offered no new strategy to save Sears.
Lampert cashes in
Lampert penned his Sunday blog in response to a Globe and Mail article that suggested he profited handsomely from Sears Canada’s demise by pocketing money that could have been reinvested in the company.
“Since 2005, Sears Canada has been a bountiful piggy bank for Lampert,” stated the article.
During that time, the company paid out more than $2 billion in special dividends to shareholders and much of the cash went to to Sears Holdings and ESL Investments — both controlled by Lampert. The money came from selling off valuable assets such as store leases.
Eddie Lampert is CEO of both Sears Holdings in the U.S. and ESL Partners – which own a 45.3 per cent stake in Sears Canada. (Sears Holdings)
Lampert responded that “ESL has always tried to be a constructive shareholder and support the success of Sears.”
He said that Sears Canada continued to invest in its operations while offering hefty dividends, and justified the dividends by stating that public companies typically reward shareholders when there’s leftover cash available.
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Many retail experts believe Sears Canada’s demise was decades in the making and that the odds are stacked against traditional department stores in an era of online shopping mecca Amazon and discount big-box stores like Walmart.
But who or what precisely sealed Sears’ fate is open for debate. There could be more mudslinging this week if Stranzl offers his own theory about Sears’ demise at his upcoming news conference.