TORONTO -- Sears Canada said Tuesday there is "significant doubt" about its future and it could sell or restructure itself, the latest sign of how the retail sector is being upended by the rise of online shopping.
The retailer (TSX:SCC), 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.
It said based on its current assessment, cash and forecast cash flows from operations are not expected to be enough to meet its obligations over the next 12 months.
"The company continues to face a very challenging environment with recurring operating losses and negative cash flows from operating activities in the last five fiscal years, with net losses beginning in 2014," Sears Canada said in a statement.
"While the company's plans have demonstrated early successes, notably in same-store sales, the ability of the company to continue as a going concern is dependent on the company's ability to obtain additional sources of liquidity in order to implement its business plan."
The announcement came as Sears Canada reported a first-quarter loss of $144.4 million, more than double what it was a year ago, and a 15.2 per cent decline in revenue.
Sears Canada said it had expected to be able to borrow $175 million, but that has been reduced to about $109 million. It said it also lacks other assets, such as real estate, that can be monetized in a timely manner.
"Accordingly, such conditions raise significant doubt as to the company's ability to continue as a going concern," it said.
While there were improvements in sales at its stores, revenue fell by about $90 million to $505.5 million due to a drop in its catalogue and online sales.
Sears Canada also postponed its annual meeting, which had been scheduled for Wednesday, until an unspecified date.
According to its 2016 annual report, the company had 95 department stores, 26 Sears Home locations and 14 outlets.
