JPMorgan to terminate credit card deal with Sears Canada
By Euan Rocha
TORONTO (Reuters) - JPMorgan Chase & Co said on Monday it notified Sears Canada Inc that it plans to terminate their credit card agreement, in another setback for the retailer.
The U.S. bank said it served the clothing and household goods retailer with a notice of non-renewal to prevent the agreement, which also expires Nov. 15, 2015, from auto-renewing.
Sears Canada also said they plan to explore a sale of the credit card portfolio to another party. In the event of a sale, JPMorgan would pay Sears Canada up to C$174 million under certain circumstances.
Sears Canada and JPMorgan said the bank will service the credit card business until at least Nov. 15, 2015, but has no obligation to do so after that date.
Sears Canada, hit by tough competition, has seen its market share erode for years. It reported an operating loss of C$187.8 million ($166.19 million) in 2013 and has sold locations at many of the country's top malls.
JPMorgan had purchased the credit card receivables business in 2005, enabling Sears Canada to pay out a special dividend to investors that year. As part of the agreement, JPMorgan agreed to pay annual marketing and other fees to Sears Canada.
Desjardins analyst Keith Howlett said in a research note that the tie-up had boosted Sears Canada's annual earnings before interest and taxes by more than C$60 million annually in the early years of the 10-year contract.
Sears Canada no longer breaks out the specific contribution from the JPMorgan agreement. Continued...