Sears' Unit Streamlines Business, Cuts Jobs - Analyst Blog

Sears Canada Inc., a unit of the cash-strapped broadline retailer Sears Holdings Corporation ( SHLD ), has resorted to job cuts and streamlining operations at its Repair Services and Parts division as well as its headquarters as a measure to revive the business.

The company is set to incorporate novel strategies over the next 6 months at its Repair services and Parts business, focused on raising efficiency, profitability and the overall customer experience.

As part of the changes at its Repair Services division, the company has decided to use only Sears-authorized contracted repair technicians in the Canadian mid-markets, triggered downsizing of the Sears technicians and support teams at these locations. However, the major markets will continue to be serviced by Sears technicians, while these teams will be streamlined simultaneously.

In the Parts division, the company will fuse the operations of its 16 stand-alone Parts processing units and a processing center in Belleville, Ontario, into three key fulfillment centers in Calgary in Alberta, Toronto and Montreal. To counter the inconvenience caused and provide local access to customers, the company will replace the closed processing centers with the opening of a Parts counter at the nearest Sears locations in these cities. Currently, the company successfully piloted Parts counters in three locations, satisfying its customers.

Additionally, the reorganization will streamline support functions at the head office as well as the field including centralizing the dispatch function directing repairs to an English language center in Toronto and a French language center in Montreal.

Simultaneously, the company announced the downsizing of employees at its head office to bring parity between its support structures and size of its business. Overall, the reorganization of the company's Repair Services and Parts operations will affect 712 employees, while head-office cuts will total 79 employees across various functions.

Earlier this month, Sears Canada successfully terminated leases at five of its stores, including 4 stores in Ontario and 1 store in British Columbia, as a part of its strategic initiatives to turn around operations. In total these stores employed 965 people.

Additionally, as part of the transformation plans announced by Sears Holdings last month, the company has decided to spin off its Lands' End and Sears Auto Center businesses. The separation is expected to provide additional liquidity while focusing on its core business.

Notably, Sears Holdings is focusing on cost containment, inventory management and merchandise initiatives to elevate margins. We commend the company's strategy of capitalizing on opportunities, while increasing profitability through its revamped organizational structure and new operating model. All these measures are expected to drive top and bottom-line growth.

Other Stocks to Consider

Sears Holdings currently has a Zacks Rank #4 (Sell). Better-performing stocks in the retail-discount space include Big Lots Inc. ( BIG ), The TJX Companies Inc. ( TJX ) and Price Smart Inc. ( PSMT ). All of these have a Zacks Rank #2 (Buy).

BIG LOTS INC (BIG): Free Stock Analysis Report

PRICESMART INC (PSMT): Free Stock Analysis Report

SEARS HLDG CP (SHLD): Free Stock Analysis Report

TJX COS INC NEW (TJX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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