Sears Canada: A Quick Look at Performance Without a Credit Program

Navigator Edition: September 2016
By: John Grund and David Woynerowski

Since November of 2015, Sears Canada has been operating without a branded credit card program.  The credit card marketing and servicing agreement between Sears Canada and JPMorgan Chase Bank (Chase) terminated on November 15, 2015.  Prior to its termination, Sears Canada offered a private label credit card (PLCC) and a co-branded Mastercard product1 in partnership with Chase.  Chase sold the two million active accounts and CAD$1.7B in receivables associated with the Sears Canada program to Scotiabank.  Scotiabank converted the Sears Mastercard accounts to a Scotiabank-branded Mastercard cash-back rewards card and is liquidating the Sears private label card accounts.

In September 2015, in anticipation of the termination of the credit card program, Sears Canada announced enhancements to its legacy loyalty program, Sears Club. Members of Sears Club earn one point for every $1 spent at Sears2, access to exclusive discount offers from Sears Canada, and benefits such as free shipping on select items. The new program also served as a transfer destination for unused rewards points on legacy Sears credit card accounts.  Subsequently, in March 2016, Sears Canada announced a partnership with GoEasy Financial, an established specialist focused on the underserved market segment, to offer real-time financing at the point-of-sale for big-ticket purchases that is expected to launch in the third quarter of 2016.

What makes this situation so unique is that the Sears Canada credit card program was once the largest of its kind in Canada, and accounted for an astounding 60% of Sears Canada’s retail sales.  In the late 90s, Sears could boast that 75% of Canadian households had at least one Sears card account.  The thought of Sears or any retailer with such a strong reliance on consumer credit being without a program is unprecedented.  As context, approximately 40% of sales at Sears’ full-line department stores are in the Home and Hardlines category where a credit program is typically fundamental.  For decades, Sears relied on both deferred and equal-pay promotional financing plans as a critical part of its retail strategy.

With the termination of the Sears credit program, the impact on sales at Sears Canada is top of mind.  As Figure 1 shows, Sears Canada has been experiencing sales challenges for several years.  The termination of the credit card program could not have come at a worse time.  As expected, recent management commentary attributed same store sales declines in part to a decrease in transactions in big-ticket items such as major appliances, due to the loss of customer financing solutions.   Figure 2 provides additional color on sales at a category level.  While there are clearly many moving parts given the magnitude of the company’s turnaround efforts, it would not have been surprising to see a larger decline in the Home and Hardlines category especially in comparison to Apparel and Accessories.

Figure 1: Selected Sears Canada Performance Metrics

figure-1_-selected-sears-canada-performance-metrics1 Total Merchandising Revenue. 2 Store Count includes Corporate Stores and Hometown Stores
Source: Sears Canada earnings reports and press releases.

Figure 2: Same Store Sales Trends for Merchandise1 Categories

figure-2_-same-store-sales-trends-for-merchandise-categories_v21 YoY Change in total same store sales by category.
Source: Sears Canada earnings reports and press releases.

Given its importance to competing in Sears’ critical merchandise categories, a robust financing offering would need to be a facet of any broader turnaround effort.  It remains to be seen whether the combination of the new Sears Club program and the pending partnership with GoEasy Financial will be enough to replace the once prominent credit card program as a sales driver/facilitator.  At the same time, it will be interesting to monitor the performance of Sears Canada should credit play a less prominent role as conventional wisdom would have thought that the sales challenges of being without a credit program would have been worse and hard to offset.

1 Product suite included the private-label Sears Card, Sears Financial Mastercard, and Sears Financial Voyage Mastercard.
2 1,000 points = $10, redeemable for a Sears Rewards card or selected merchandise.

For more information, please contact John Grund, Partner,; or David Woynerowski, Partner, Both specialize in Credit Card Issuing.

To read the rest of this article, please subscribe to

The Navigator Newsletter