Sears Canada Inc. is closing large stores in three Canadian cities — Vancouver, Calgary and Ottawa.

"While we had no plans to close stores, the transaction for these three specific locations provides an attractive financial benefit for the company," president  and CEO Calvin McDonald said in a statement Friday.

The retailer will get $170 million from real estate developer and landlord Cadillac Fairview Corp. Ltd. Sears will look into opening other stores in the three cities, the company said.

About 670 staff — 310 in Vancouver, 200 in Ottawa and 160 in Calgary — will be affected, a company representative said. Employees affected by the closings can apply for positions at other stores owned by the chain.

The deal is set to close by Oct. 31.

While McDonald said the deal is "very advantageous" for Sears Canada, the chain has been bracing for increased competition, including the arrival of U.S. discount giant Target in 2013.

The closures should not be interpreted as a death knell for the struggling retailer, McDonald says.

McDonald — who took the lead role last summer to help reverse recent losses — said the retailer hadn't planned to sell or close stores, but an offer from its landlord, Cadillac Fairview, was attractive.

 "It's a different scenario than closing and walking away from stores," McDonald said in an interview.

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Sears shares gained Friday.

But he said the closures shouldn't be interpreted as the beginning of the end for Sears Canada.

The company is testing out four new concept store formats customized to different markets, with pilot projects slated to be opened later this year.

"These are all indications of a company very excited about its offer very excited about its future growth and we're working to transform ourselves and deliver a strong business."

The decision was made easier because the balance of sales at those stores doesn't reflect the strengths — hard goods, major appliances, furniture and mattresses — of the rest of the chain, McDonald said.

Closing the three stores will mean forgoing revenues of about $160 million to $200 million, said Desjardins Securities analyst Keith Howlett, who also noted that the move is positive for the chain.

"Sears Canada has a strong balance sheet underpinned by owned real estate and valuable under-market leases," Howlett said.

"These assets afford the company some additional breathing room, as it seeks to turn the tide of declining sales and profitability."

Investors also appeared to weigh the move favourably with shares in Sears Canada gaining seven per cent or 84 cents to $13.04 Friday on the Toronto Stock Exchange.

The firm announced price cuts on more than 5,000 items in February, and has been changing its business to boost sales.

Sales fall in 4th quarter

"We are investing in a refresh of our stores and piloting new formats which will provide Canadians exciting ways to access Sears products and services," McDonald said.  "Sears continues to execute its transformation strategy and remains focused on growing the business."

Two of the stores, in the Vancouver Pacific Centre and Ottawa Rideau Centre, are former Eaton's stores that were reopened as Sears in 2000.

The Calgary location has been a Sears store since 1965 and is located in the top-performing mall in the city.

Sears Canada recently reported that sales fell 6.4 per cent in the fourth quarter, ended Jan. 29, and the company reported a loss of $60.1 million (58 cents a share) for the year ended in January, compared with a profit  of $115.2 million ($1.07 a share) for the prior year.

In January, Sears Canada laid off 400 employees when it closed most of its in-store cafés. It cut about 70 jobs at its head office in Toronto late in 2011.

Sears has about 30,000 employees across Canada.

With files from The Canadian Press