Sears Canada CEO Leaves In Dispute Over Paying For Turnaround

Sears Canada (NASDAQ:SHLD) CEO Calvin McDonald has left in the middle of a turnaround initiative for the struggling department-store chain, apparently because of disagreements with Sears Holdings CEO Eddie Lampert over spending priorities, the Globe and Mail reported.

The chain made the announcement on Tuesday (Sept. 24), saying that McDonald was leaving to take a position with an unidentified "leading international company." Douglas Campbell, the chain's COO, is the new CEO.

McDonald, who was named Sears Canada CEO in June 2011, has spent the past two years turning the retailer around by focusing on key "hero" categories in which Sears Canada could shine, including women's dresses, swimwear and coats, along with baby goods, appliances and mattresses. Areas where Sears stores couldn't compete profitably, including electronics and toys, were cut from stores, though Sears Canada still sells products in those categories online.

He also focused more on higher-margin private labels and launched a promotional magazine called The Look Report, modeled on Loblaw's Insider's Report.

The approach appeared to be working—apparel sales were up 0.5 percent, 4.5 percent and 3.6 percent over the past three quarters. But McDonald apparently left after what one unnamed source called a disagreement over "the pace at which capital was being deployed to keep the momentum of the transformation going." Translation: Perpetually cash-strapped Sears Holdings wanted to stop renovating stores and sell off more leases as Canada's retail competition heats up.

And while Campbell appears to be a reasonable replacement, McDonald's departure isn't seen as good news for Sears. Retail analyst Keith Howlett at Desjardins Capital Markets told the Globe and Mail that McDonald "was a talented, energetic retail executive and might have been able to accomplish a turnaround against what we perceive as long odds," and his exit reduces the probability of an operating turnaround at Sears Canada.

For more:

- See this Globe and Mail story
- See this Wall Street Journal story

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