May 22, 2014 12:02 pm
Updated: May 23, 2014 2:05 pm

Here’s where Sears Canada may be making its stand in the retail wars

Is Sears Canada looking to the big skies of Western Canada to revive its fortunes?

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Sears Canada has beaten a steady retreat over the past year or more as other retailers have continued to muscle in on the iconic department store’s historical turf.

But Sears’ exodus has been calculated, limited to a specific geography: big cities, where competition from the likes of newcomer Target, old foe Hudson’s Bay as well as others is highest.

Sears has abandoned high-profile “anchor” locations in Vancouver, Calgary, Toronto, Ottawa and London, Ont., in recent months.

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Last week, it announced it has sold a stake in a shopping centre in Trois-Rivieres, a city of 127,000, and is planning another store closure in the greater Toronto area.

It appears though a line is being drawn in smaller markets, particularly in Western Canadian towns. Investment experts at Desjardins said Thursday Sears locations in suburbs and towns in the prairies have been sources of “historical strength.”

READ MORE: Are more fire sales coming at Sears Canada?

Sears will need it. The retreat from big cities hasn’t arrested sliding sales yet.

After a brief pause last summer, sales at existing Sears locations open at least a year – a key measure in retail to gauge the ongoing pace of business – are declining sharply again (see chart below).

“To date, there is no visible diminution in the pace of the company’s same-store sales decline resulting from reducing exposure to these urban trade areas,” Desjardins analyst Keith Howlett said in a note Thursday.

Sales at Sears Canada stores open more than one year have been falling for the past three years. (Desjardins)

Making matters worse for Sears (and all retailers) is that consumer spending is expected to cool, experts suggest, as households work down record personal debt levels.

“Our forecast calls for moderation in the pace of real consumer spending over the next two years,” Jonathan Bendiner, an economist at TD Economics said Thursday following the release of data that showed retail spending edged down in March.

“While we recognize Sears Canada’s historical strength in the prairies and in smaller cities across Canada, we are skeptical … that there is much shelter to be found in those markets any longer,” Desjardins’ Howlett said.

There might be, though. The increases in retail spending for March were almost exclusively confined to Western Canadian provinces where regional economies are performing far better than in the east, and where Sears appears to be making its stand.

WATCH: Sears Canada selling of leases as it closes some marquee stores

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