Sears Canada explores sale, raises 'going concern' doubts

Sears store in Toronto

"Such conditions raise significant doubt as to the Company's ability to continue as a going concern".

The company has been struggling since October 2013 when it announced the closure of five locations across Canada, including the Richmond Centre location.

The retailer, known for catalogues that were a staple in the homes of generations of Canadians, saw its shares plummet by 39 per cent to 70 cents on the Toronto Stock Exchange minutes after the opening bell.

Sears Canada (SCC.TO) is putting itself up for sale after another quarter of precipitous revenue declines. Also, it has retained BMO Capital Markets, as a financial advisor, and Osler, Hoskin & Harcourt LLP, as a legal advisor. Sears Canada says it has been unable to arrange as much financing as it hoped and there's "significant doubt" of the company's ability to continue as a going concern. However, the retailer posted a loss of C$144.4 million for the quarter, up from from C$63.6 million in the year-ago period.

Sears Canada had expected to be able to borrow up to $175 million, but that total has been reduced to $109 million before transaction fees.

In its first quarter earnings release, the company said it doesn't think it will generate sufficient cash flow to meet its obligations over the course of the next year, prompting the move.

As a result of the latest developments, Sears is postponing its annual meeting, which was scheduled for Wednesday at 8 am. The company says it also lacks other assets, such as real estate, that can be monetized in a timely manner.

"Department stores have been suffering challenges for some time now", said Marty Weintraub, who leads Deloitte's national retail consulting practice for Canada.

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