The embattled retailer, which sought protection from its creditors in June, said Tuesday it had failed to find a buyer that would allow it to continue as a going concern.
The court overseeing Sears Canada's operations is set to hear a motion Friday seeking approval for the liquidation and wind down of the business.
"The company deeply regrets this pending outcome and the resulting loss of jobs and store closures," Sears Canada said in a statement on Tuesday.
Last week, Sears received a revised bid from a buyer group led by its executive chairman Brandon Stranzl to buy the business and keep it operating. It was the latest move in a weeks-long discussion process after Stranzl stepped away from his role to launch the bid.
However, on Tuesday, the retailer said that "following exhaustive efforts, no viable transaction" was received. A lawyer for Stranzl did not immediately respond to requests for comment.
Sears Canada's court-appointed monitor FTI Consulting Canada told the court last week it would consider the revised bid but the company was running out of money and time.
Sears Canada currently has 74 full department store locations, eight Sears Home Stores, and roughly 49 Sears Hometown stores, facing closure, according to company spokesman Joel Shaffer.
The retailer currently has approximately 12,000 employees, three-quarters of which are part-time, Shaffer added. Of the roughly 800 employees in Sears Canada's head office, the vast majority will leave next week, he said.
That tally doesn't include the 2,900 job cuts Sears Canada previously announced in June, when it announced the closure of 20 department store locations, 15 Sears Home stores, 10 Sears Outlet and 14 Sears Hometown locations.
Sears Canada plans to start the liquidation sales no later than Oct. 19, a process which is expected to continue for 10 to 14 weeks.
However, Susan Ursel, a lawyer representing current and former Sears Canada employees, says a liquidation would be "extremely detrimental."
"We are dismayed to say the least that this is going in this direction," Ursel said in an interview. "But we are working, along ... with pension representative council, to pursue all avenues possible as an alternative to liquidation. So, it ain't over yet."
She would say only that they are looking at "different forms of a going concern operation."
Litigators for a group of lenders who have provided debtor-in-possession financing to Sears Canada to keep it afloat pushed for a liquidation agreement to be entered into by Oct. 7 at the latest. The lenders pushed for approval no later than Oct. 13, in order to liquidate before the crucial holiday season and maximize value.
Sears Canada has been operating under the Companies' Creditors Arrangement Act since June, but had been struggling for years as consumers gravitated towards e-commerce and away from big department stores.
Jean Rickli, a senior advisor with retail and marketing consulting firm J.C. Williams Group, said the retailer had taken some positive steps to revitalize the brand in recent years, such as a new logo and utilizing pop-up shops.
"Frankly, it was all a little, too little, too late," he said.
Sears Canada has faced a "slow and steady demise over the last 20 years," said retail analyst Bruce Winder, the co-founder and partner of Retail Advisors Network. He pointed to sales declines, dusty shelves and a lack of investment in technology.
The move towards liquidation is the latest evidence that the Canadian retail industry is in "major flux" and that companies that were safe decades ago are now "in jeopardy", he added.
Winder added that the Canadian retail landscape is much smaller now, making it tougher for the thousands of Sears Canada employees to find new jobs of similar calibre.
"It's a sad day for us in retail, in many ways," he said. "(For) the employees, as well as losing an icon."