Nordstrom to exit Canada, lay off 2,500 employees

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Luxury retailer Nordstrom Inc. is exiting Canada by closing 13 department stores and laying off 2,500 employees, becoming the latest U.S. chain to retreat in the face of strong domestic competition.

Seattle-based Nordstrom began to wind down outlets in British Columbia, Alberta and Ontario on Thursday by filing for creditor protection. As part of the court-supervised process, the company has shut down its e-commerce platform and plans to hire a liquidator. The chain plans to close its six Nordstrom and seven Nordstrom Rack stores by the end of June.

“We entered Canada in 2014 with a plan to build and sustain a long-term business there. Despite our best efforts, we do not see a realistic path to profitability for the Canadian business,” said chief executive officer Erik Nordstrom in a press release.

Nordstrom expects to take a US$300-million to US$350-million charge as it closes down Canadian operations. Founded in 1901, the retailer has 350 North American outlets. Its major Canadian competitors include the seven-outlet Holt Renfrew chain, owned by the Weston family, and Toronto-based Hudson’s Bay Co., which also runs Saks Fifth Avenue.

George Minakakis, a retail consultant, said Canada isn’t large enough to support so many high-end department stores chains.

“I’ve always felt that the Canadian market was oversaturated with department stores, because the depth isn’t there and the economy isn’t there, and on the high end there’s just not enough deep pockets,” he said.

Over the past three months of 2022, a period that includes the critical holiday shopping season, customers trimmed their spending at Nordstrom. The chain’s overall sales fell by 4 per cent compared with the previous year, while revenue at discount outlet Nordstrom Rack dropped by 8 per cent.

In addition to closing Canadian operations, Mr. Nordstrom said: “We took decisive actions to right-size our inventory as we entered the new year, positioning us for greater agility amidst continuing macroeconomic uncertainty.”

In a sign of how much money Nordstrom was losing in Canada, the company said closing the stores will lower its projected 2023 sales by US$400-million, but improve its earnings before interest, taxes, depreciation and amortization by US$35-million.

Discount retailer Target Corp. shuttered 133 stores in 2015, laying off 17,000 employees and taking a US$5.4-billion loss. Target moved into Canada by acquiring leases from Hudson’s Bay unit Zellers, which closed down. Hudson’s Bay is now bringing back the Zellers brand.

In November, home improvement chain Lowe’s Cos. Inc. sold its Canadian operations, including the Rona chain, to a private equity fund manager for US$400-million, after spending US$2.4-billion in 2016 to acquire Rona. Lowe’s faced stiff competition from Home Depot Inc. and St. Jacobs, Ont.-based Home Hardware Stores Ltd.

From Kmart to Nordstrom: A list of U.S. retailers that have closed down in Canada

Nordstrom’s exit will mean empty space and lost lease payments for mall owners across the country. The chain has six outlets in Toronto and region, two stores in each of Ottawa and Calgary, and single stores in Edmonton, Langley, B.C., and Vancouver.

The chain’s biggest landlord is Cadillac Fairview Corp. Ltd., the real estate arm of Ontario Teachers’ Pension Plan, which owns properties that are home to five Nordstrom stores, including an anchor location in the Toronto Eaton Centre.

Nordstrom’s landlords also include Ivanhoé Cambridge, with two stores, and Oxford Properties, which has one Nordstrom outlet. Ivanhoé is owned by Caisse de dépôt et placement du Québec while Oxford is the real estate arm of the Ontario Municipal Employees Retirement System.