Sears Canada (TSE:SCC)is dropping the venerable Eatons name and converting the seven stores operating across the country under that banner to Sears locations, a move that will affect 600 jobs.

The change applies to stores in six cities – Ottawa, Winnipeg, Calgary, Vancouver, Victoria and Toronto.

The company said it has two locations –Toronto's Yorkdale Shopping Centre and the Polo Park Shopping Centre in Winnipeg – where an Eatons store operates alongside an existing Sears outlet. Sears Canada said it will decide which of the stores to keep in those shopping centres.

Sears is dropping the Eatons name from 7 remaining stores
Sears is dropping the Eatons name from 7 remaining stores

Sears said the 600 people affected by the move can apply for other jobs within the company.

"A number of reasons led to this decision," Mark Cohen, Sears Canada's chairman and CEO, said in a release.

"We are focused on near-term retail market weaknesses as well as longer-term changes in customers spending habits, wants and needs. These observations coupled with Eatons lack of critical mass suggest that this change should take place now," Cohen said.

Sears Canada bought 19 Eatons stores in 1999 for $30 million after the historic retailer hit financial trouble and sought bankruptcy protection in 1997 and again in 1999.

Sears relaunched the Eatons chain amid a flurry of marketing hype in November of 2000. However, the Eatons stores have struggled since then as they tried to carve out a niche in the increasingly competitive Canadian retail market.

Sears has already converted 12 former Eatons stores into Sears outlets. The company said those dozen stores are profitable and performing at or above expectations. Those stores are not affected by Monday's announcement.

Sears Canada said it will take a one-time pre-tax charge in the first quarter of approximately $180 million. The charge will include $30 million in cash for severance payments, third-party commitments and transition costs, and a $150 million non-cash write-down of fixtures and leasehold improvements.

Total one-time after-tax charges are expected to be about $1.15 per share.

Following the conversion of the affected stores to the Sears format, the company expects its pre-tax earnings to improve by $40 million a year.

"Management is therefore revising its 2002 earnings guidance. Earnings for the full year will likely exceed $1.00 per share before one-time charges. This compares to $0.59 per share last year," the company said.

In a conference call, Cohen said he did not know how the change will affect the name of the Toronto Eaton Centre, the shopping centre that is home to the Eatons flagship store.

"We don't have any influence or connection to the centres themselves," Cohen said.

Cadillac Fairview, which owns the Toronto Eaton Centre, along with shopping centres in Victoria, Vancouver, Winnipeg and Ottawa that include Eatons stores, said it was business as usual.

"Cadillac Fairview does not anticipate any changes or interruption in the operation of its shopping centres during the conversion process, and has no current plans to change the names of Toronto Eaton Centre or Victoria Eaton Centre," the company said.