Sears asks workers to take unpaid leaves

Date: Thursday, January 10, 2008
Author: Marina Strauss, Globe and Mail

Canada's traditional department stores, which have squeezed suppliers and cut other costs, are turning to their employees for further savings as the retailers emerge from what some say was a tough holiday season.

Sears Canada Inc., which is controlled by U.S. hedge fund financier Edward Lampert, is encouraging its employees to take unpaid leaves. It's also snipping some staff discounts and eliminating postretirement benefits. This fall the retailer demanded that some suppliers fork over retroactive payments of as much as 10 per cent on past orders, tied to the stronger loonie.

Hudson's Bay Co., owned by wealthy U.S. businessman Jerry Zucker, plans to move its downtown Toronto head office staff to its Zellers headquarters in Brampton, Ont., sources said. Some staff are unhappy about the trek to the suburban workplace. But the relocation will help HBC generate healthy revenue by leasing the prime office space or selling it outright, sources said.

Insiders are predicting a further shakeup among HBC's ranks, although a spokeswoman for the company said she couldn't comment.

The latest round of cost-cutting measures, aimed at reviving the retailers' fortunes, will be a burden on employees, especially at Sears, said John Williams of retail consultancy J. C. Williams Group.

"All the department store chains are losing market share," Mr. Williams said. "When you're starting to [cut costs] like that, you start to cut the things that hurt the business. These things affect people, which certainly must affect attitudes and morale, which translates into cutting productivity. This is shocking."

For years, industry observers have expected Sears and HBC to join forces to strengthen their positions, and rumours of an upcoming takeover have recently made the rounds.

Sears Canada spokesman Vincent Power said he couldn't comment on the speculation or on holiday sales.

He confirmed that last month Sears asked full-time workers if they wanted to take a "voluntary unpaid absence" during December, January and February, depending on workload. He wouldn't say how many opted for the program.

He said employee discounts will be revised this fall. Employees will get 10 per cent off big-ticket appliance and furniture purchases, and 20 per cent off clothing and home decor. Currently, salaried employees get 25 per cent discounts while hourly workers get 15 per cent.

But Mr. Power denied that the moves were cost-cutting efforts. The unpaid leave is an attempt to give employees the chance to take time off that they wouldn't otherwise get, he said. The changes to staff discounts are a bid to make the markdowns more uniform.

Over all, the company has trimmed its work force to about 37,000 at the end of 2006, from almost 43,000 two years earlier, he said.

In the fall, Sears sealed a deal to sell its Toronto head office and move its staff to the top floors of its flagship store.

Mr. Williams said Sears' recent offer of unpaid leave is unprecedented for a large chain. "What they're down to is nickel-and-diming," he said.

A source familiar with HBC, which owns the Bay and Zellers, said employees expect big changes soon. The source said Mr. Zucker pledged to refrain from a radical overhaul for two years when he acquired HBC in early 2006. "Everyone is expecting major head office cuts and store closures."

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