10/29/2013 06:13 EDT | Updated 01/23/2014 06:58 EST

Sears Canada to close flagship store, 4 others

Sears Canada is closing five of its department stores, including its flagship location in Toronto's Eaton Centre, as part of a $400-million deal.

Sears plans to sell the leases of those five stores to mall operator Cadillac Fairview, in what would be the biggest sale since the retailer began shedding assets and cutting jobs in an effort to turn around its struggling operations.

The planned closure of the Eaton Centre location, by 2014, is notable as it is considered the company's flagship store and is in a central tourist area.

About 965 employees will be affected by the closure of the five locations, although Sears Canada says it will have the option to apply for other jobs within the company.

As part of the sale, Sears will close stores at Sherway Gardens in Toronto and London-Masonville Place in London, Ont., by February, and the Markville Shopping Centre in Markham, Ont., and Richmond Centre in Richmond, B.C., by February 2015.

Trouble for U.S. parent company

The company's U.S. parent is also planning some drastic changes to cut costs.

Sears Holdings Corp., which owns 51 per cent of Sears Canada, is considering separating its Lands' End and Sears Auto Center businesses from the rest of the company. The retailer also plans to continue closing some of its unprofitable stores as it moves ahead on its turnaround efforts.

Sears has been working for some time to cut costs and lower its debt. The company said Tuesday that it would likely pursue a spinoff of Lands' End and not a sale. The retailer also said that it has already started repositioning Sears Auto Center around services other than tires and is evaluating strategic options for the business.

Sears anticipates closing unprofitable stores, including locations with leases that are set to expire soon. The retailer said that it would take the capital from the unprofitable locations and redeploy it elsewhere.