September 25, 2014 / 4:00 PM / 3 years ago

UPDATE 2-Sears Canada CEO to step down by year-end

4 Min Read

(Adds comments from Sears Holdings and analyst, adds CHICAGO to dateline)

By Solarina Ho and Nathan Layne

TORONTO/CHICAGO, Sept 25 (Reuters) - Department store chain Sears Canada Inc, which has had six consecutive years of declining revenue, said on Thursday that Chief Executive Douglas Campbell will resign by the end of this year so that he can tend to family matters.

Sears Canada, which is majority-owned by Sears Holdings Corp , is facing intense competition and has seen its market share erode for years.

Campbell, a turnaround specialist who joined Sears Canada in March 2011 and took over as CEO a year ago, stepped in when the previous chief executive, Calvin McDonald, left the company. Media reports at the time said McDonald's departure was due to differing views with the parent company on restructuring efforts.

Campbell will step down by Jan. 1, 2015.

"Maybe they'll bring someone in ... and try to shore up their business as best they can so that either it becomes profitable or at some point they can monetize it down the road," said Evan Mann, senior analyst at Gimme Credit.

Campbell's departure comes the same week that the New York Post reported that Sears Holdings' efforts to sell its 51 percent stake in Sears Canada failed to garner any acceptable bids.

The Post said the lack of bids was the main reason Sears Holdings took out an emergency $400 million loan from controlling shareholder Eddie Lampert, a hedge fund billionaire and chairman of Sears Holdings.

The short-term loan gave the company financial flexibility and a more predictable source of funding for the holiday season, Sears Holdings said.

But the financing also suggested that no deal for Sears Canada was imminent, said Mann.

"If you can't sell it then you gotta fix it," he said.

Sears Holdings said on Monday that it continues "to explore alternatives to recognize value" from its stake in Sears Canada, which reported its ninth loss in 14 quarters last month.

The Canadian chain has cut about 3,000 jobs since November, sold several leases over the past year and closed some of its most prominent stores, ceding the space to new Canadian entrants like Nordstrom Inc.

Even though it has been posting losses, Sears Canada issued a special dividend last year after selling some assets. The company said on Thursday that its board will review prospects and any potential return of capital to shareholders will be based on its holiday season performance.

"Our interpretation is that there will be no declaration of a special dividend until the release of 4Q FY14 results," Desjardins Capital Markets analyst Keith Howlett wrote in a client note. Sears' fiscal year typically ends around Feb. 1.

"Both Sears Canada and Target Canada are posting substantial operating losses," Howlett said. "Long-term prospects for both of them appear to be very challenging."

Sears Canada's shares have fallen more than 23 percent since May. The shares were up 0.6 percent at C$12.72 in Toronto late on Thursday. ($1 = $1.11 Canadian) (Additional reporting by Manya Venkatesh in Bangalore; editing by Joyjeet Das, Peter Galloway, Jeffrey Hodgson and Matthew Lewis)

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