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File photo of shoppers making their way through the Sears store at the Eaton Centre in downtown Toronto on Monday, January 13, 2014.

Frank Gunn/The Canadian Press

Sears Canada Inc.'s U.S. parent company says it is contemplating the sale of the ailing retailer.

Sears Holdings Corp. said on Wednesday it is "exploring strategic alternatives for its 51 per cent interest in Sears Canada, including a potential sale of Sears Holdings's interest or Sears Canada as a whole."

The parent company said Sears Canada's board and management "intend to co-operate fully with Sears Holdings in this process to achieve value for all shareholders."

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Sears Canada has been struggling in a tough retail market, selling valuable real estate including prime store leases.

Over the past year, it has sold leases to seven stores, including the Toronto Eaton Centre location, for a total of $591-million in proceeds.

Thousands of employees have also been let go.

Sears Holdings Corp. is controlled by hedge fund billionaire Edward Lampert.

Desjardins Securities equiry analyst Keith Howlett said in a research note Wednesday that Sears Holdings' hiring of an investment banker indicates "that the decision to exit has been made, with the route to be determined.

"It is positive for shareholders of Sears Canada that Sears Holdings is bringing matters to a head in order to surface as much value as possible, at as early a date as possible."

It is not clear which companies would buy Sears. Now that U.S. discounter Target Corp. has had a difficult time in Canada since launching its first stores here last year in former Zellers sites, other U.S. retailers are thinking twice about the move.

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But European and Asian retailers are still interested in coming to Canada some time in the future.

British cheap-chic chain Primark, which announced recently it plans its first store overseas in the United States, may consider Sears as a launching pad in Canada.

Its owners are part of the wealthy Canadian Weston family, which owns high-end fashion chain Holt Renfrew & Co., so it is familiar with this country. The Galen Weston family also controls Loblaw Cos. Ltd., Canada's largest grocery retailer.

Japanese-owned Uniqlo, which also sells affordable fashions, is now looking for stores in Canada, although it may not find the Sears locations in high-profile enough locations. Uniqlo has space blocked off for it in Toronto's high-performing Yorkdale Shopping Centre in Toronto, sources have said.

The remaining Sears stores are mainly in the suburbs or smaller centres, and Uniqlo tends to look for high-profile urban locations for its first launches.

British clothing chain Next is a familiar name in many markets, including Greece, China and Kuwait. It may consider Canada as a next stop.

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U.S. discounter Kohl's looked at coming to Canada a few years ago, but doesn't appear to be actively seeking space now. U.S. department-store Macy's Inc. also hasn't been actively eyeing Canada recently, although it has in the past, industry sources have said.

Many of the foreign retailers that came to Canada in the past several years, such as Forever 21, Sephora and J. Crew, may be interested in some of the Sears locations, although not all of them. Sears' landlords, which have bought back some of Sears' best located store leases in the past two years, have already sold back the leases to U.S. department store chain Nordstrom Inc., which is opening its first store here later this year.

U.S. shoe chain DSW, which is a discount footwear retailer, recently announced it was coming to Canada by buying 44 per cent of privately held Town Shoes, which also owns discounter The Shoe Company. DSW may want to pick up some Sears stores.

But Sears stores tend to be larger, so not necessarily appropriate for smaller specialty chains that may be eyeing an entry into this country.

Mid-market Macy's seems to be an unlikely suitor for Sears Canada. On an analyst conference call on Wednesday morning, chief financial officer Karen Hoguet said the company's CEO Terry Lundgren has "not been interested in Canada and has been more interested in China." She said that Macy's, which also owns high-end Bloomingdale's, is continuing to "explore international opportunities for both Bloomingdale's and Macy's.

Bloomingdale's has a license deal to operate in Dubai, "which has been a very successful venture for both the partner and for us," Ms. Hoguet said. As a result, Macy's may "broaden that kind of partnership as well … So I would say international is still something that's intriguing, but nothing imminent, you know, in terms of significant."

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Desjardins Securities' Keith Howlett sees four distinct groups of potential buyers who could partner with each other: major landlords and pension funds interested in better use of mall space occupied by Sears Canada; private equity and/or retail turnaround groups such as Sun Capital, Hilco and Kohl's; large-format retailers mulling an entry into Canada, such as Macy's and Kohl's; and domestic retailers – such as Hudson's Bay Co. – wanting to foreclose new entrants.

"In our view, the complexity of the situation requires private equity participation in order to realign the assets into separate components that are manageable and of interest to different retail operators."

Mr. Howlett anticipates that Sears Canada will declare a special dividend in 2014, no matter how the exploration of strategic options progresses.

Sears Canada has 14 owned department stores, 96 leased stores, two owned Sears Home outlets, several distribution centres and other related businesses such as trucking.

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