(Reuters) - Sears Holdings Corp
Separately, Sears Holdings reported a first-quarter adjusted operating loss that came in better than analysts' estimates but revenues fell from a year ago.
Sears Holdings owns about 95 percent of Sears Canada
The move follows efforts this year by Sears Holdings to cut costs by closing scores of stores and raise cash by selling prime real estate and spinning off its Sears Hometown and Outlet businesses and certain hardware stores.
Sears Canada and Sears Holdings said in separate statements the spinoff would allow each company to focus on its businesses, both of which are struggling with declining sales.
Two years ago, the company added to its stake in Sears Canada by buying 17.3 percent of the Canadian unit from hedge fund manager William Ackman's Pershing Square Capital Management.
Ackman and other minority investors had thwarted Sears Holdings' attempt in 2006 to buy the shares of Sears Canada it did not already own.
At the time that Sears bought out Ackman's stake, analysts praised the move, saying the cash-rich Canadian unit was a way to improve Sears Holdings' financial position.
But Sears Canada's fortunes have reversed course since then, and it has been a drag on overall results.
On Wednesday, Sears Canada reported sales at stores open at least a year -- a key measure for retailers -- fell 6.3 percent, a far steeper drop than the combined 1.3 percent decline at its U.S. stores and Kmart discount chain.
Separately, Sears Holdings reported net income of $189 million, or $1.78 per share, for the quarter ended April 28, compared with a $170 million loss, or $1.58 per share.
The retailer reported an adjusted loss from continuing operations of 31 cents per share, better than the 67 cent loss Wall Street was expecting, according to Thomson Reuters I/B/E/S.
Overall Sears Holdings revenue fell 2.8 percent to $9.27 billion, hurt by store closings, declines in sales of appliances and home electronics, and weakness in Canada.
There were some bright spots. Sears U.S. stores saw sales of apparel and footwear rise, while Kmart's gross profit margin rose, helped by fewer markdowns in toys and sporting goods.
(Reporting By Phil Wahba and Dhanya Skariachan; editing by Lisa Von Ahn and Jeffrey Benkoe)