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Sears Chops Brands to Focus on Fashion

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In its latest cost cutting move, on Tuesday Sears Holdings affiliate Sears Canada announced plans to cut the number of its retail offerings. “We are going to rationalize our vendor base,” chief executive Calvin McDonald said at the company’s annual general meeting. “We want big brands – we just don’t need a plethora of brands that are nominal in size and dollar volume.”

Sears Canada has experienced annual revenue drops since 2006 and lost $60.1 million in 2011, which highlights the difficulty of the task facing McDonald. He has prepared a three-year turnaround plan, but is facing competition from other US retailers entering the market, including Target, which intends to open 120-130 stores when it enters Canada next year.

McDonald plans to cut the number of private apparel brands offered from 90 to 20 and focus more on fashion offerings. He intends to rid the company of marginal brands and try to promote an aesthetic reminiscent of J Crew.

In contrast to retailer JC Penney’s strategy of eliminating discounting, McDonald has slashed prices on over 5000 items and regularly holds sales. He has also eliminated excess inventory and cleaned up the layout of the stores to minimize clutter. Sears Canada has cut 400-500 employees from its head office as well.

The problems at Sears Canada have been largely blamed on falling retail demand. The traditional bricks and mortar sector has suffered as E-commerce and fast fashion have reduced their slice of the pie. Sears Canada recently closed 3 stores and sold their leases for $170 million, which reflects predictions that struggling legacy retailers will be able to balance negative cash flow in the near term by unloading valuable real estate.

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