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Sears Canada 2016 Turnaround Initiative Involves Pinball

Don’t count out Sears Canada just yet.

The 64-year-old struggling retailer, headquartered in Toronto, on Friday revealed that it set up a specialized retail innovations lab in a bid to generate new ideas that focus on delivering customer-centric, digital solutions.

“We are making real and meaningful changes at Sears Canada to create a new Sears Canada organization,” Brandon Stranzl, executive chairman of Sears Canada Inc, said. “We are working to create Sears Canada 2.0.”

That’s something the retailer’s shareholders will be happy to hear.

News of the lab coincided with the announcement that revenue declined 8.7% to 887.6 million Canadian dollars (roughly $679 million) in the fourth quarter. Same-store sales across all channels decreased by 1.6% compared to the same period last year, while comps for the company’s core retail store network—comprising 95 full-line department stores and 41 Sears Home stores—were down 0.8%.

“The difference between the decline in revenue and the decline in same-store sales was primarily due to store exits since last year and declines in the company’s direct business,” Sears Canada said in a statement, which called 2015 “a year in which we focused on stabilization,” and said that 2016 will center on “re-engineering.”

That’s where the retail innovations lab comes in. Other initiatives will include installing more shop-in-shops across the Sears Canada store base, both national brands and private labels, as the top performing ones have shown as much as 36 percent better sales per square foot, 19 percent better gross margins and 92 percent better inventory turns, when compared with the overall merchandise category averages cross the company.

Plus, Sears Canada plans to roll out “Pinball,” the in-store merchandising initiative it kicked off in Q4, more extensively in 2016. Pinball was implemented in select areas of women’s apparel in a handful of test stores last quarter and resulted in a more than 10 percent year-over-year growth in sales, versus a control group.

The company, which continues to employ 17,000 people in Canada, also said it plans to cut back on merchandise in order to simplify choices for consumers—less is more—and tweak the assortment in a large number of stores to be more relevant to more Canadians.

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In other news, the company announced Friday that it had entered into an $84 million sale-leaseback agreement for its national logistics center in Calgary. It also implemented “a zero-based budgeting process that will continue to be reinforced with a cultural focus on frugality,” having identified cost reductions of between $100 million and $127 million for the year.

As of Jan. 30, Sears Canada operated 159 corporate stores, 125 Hometown stores, more than 1,200 catalogue and online merchandise pick-up locations, 84 Sears Travel offices and a nationwide repair and service network.