(Article by Hollie Shaw, The Financial Post)

Head office employees at Sears Canada are bracing for more layoffs as the struggling retailer moves forward under its new turnaround specialist CEO.

The Financial Post reported that the company held a series of head office meetings last week with employees at multiple levels and departments to outline its strategies, according to sources, which include a goal of streamlining head office and decreasing its salary costs.

The scope of the pending cuts was not revealed, and no store-level employees will be affected, sources said.

The reports come at a time of renewed turbulence for the retailer, which saw the surprise exit last month of CEO Calvin McDonald, who was replaced by former chief operating officer Douglas Campbell.

While trying unsuccessfully to boost its sales, the retailer has also been tackling a top-heavy cost structure in recent years. Sears Canada has seen its revenue deteriorate by more than $2-billion during the last decade, to $4.3-billion in 2012 from $6.5-billion in 2002.

Sears Canada has reduced its expenses by $100-million in the past two fiscal years and is aiming to trim an additional $100-million to $200-million from fixed costs in the next couple of years. In August, the company laid off 245 head office employees in IT and finance.

Industry analysts have speculated the retailer’s streamlining efforts will move to the fore with the announcement of Mr. Campbell’s promotion to CEO three weeks ago. Company chairman William Crowley lauded the former marine’s “disciplined approach,” as “instrumental in managing costs and driving efficiencies,” at Sears Canada.

Vincent Power, the retailer’s spokesman, would not comment yesterday on “rumours or speculation” about upcoming layoffs.

“Like most organizations on an ongoing basis, we do review our organizational structure to make sure it is in line with the needs and size of the business,” Mr. Power said. There is “nothing imminent” to be announced with respect to head office staff, he added.

The company has about 1,600 employees at its head office out of a total workforce of 25,000.

In addition to cutting costs and exiting or limited slow-selling categories, the retailer had also raised cash by selling off the leases of three unproductive store locations, and currently has the option to sell a fourth in Scarborough within five years.

But the revival attempt by Mr. McDonald had yet to show traction in the company’s results; in the second quarter, revenue fell 9.6% to $960.1-million, and same-store sales decreased 2.5%. Net earnings were $152.8-million compared with a net loss of $9.8-million in the second quarter last year, but without a one-time gain on the sale of leases back to landlords, Sears Canada would have lost $11.2-million, or 11¢ a share.

Retail expert Wendy Evans, president of Evans and Company Consultants Inc. in Toronto, said Sears Canada is one of a few retailers who could benefit from additional streamlining.

“Sears has been very traditional in terms of structure and culture and that has to change,” she said.

“There are likely a lot of savings and efficiencies that could be realized in terms of category management and how they are managing their purchasing. You get into a habit of doing things the old way and there are a number of retailers who are like that, who are not streamlined and efficient. So it is time for that to happen.”

The August layoff of 245 IT and finance employees was the second round of pink slips at Sears Canada this year, following a layoff of 700 in January, when the bulk of cuts came from the retailer’s stores and distribution centres. Sears also laid off 470 employees in late 2011 and early 2012.

Source: The Financial Post