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A changing of the guard at Canadian retailers

Shoppers outside of Sears Canada at Toronto's Eaton Centre.

Deborah Baic/The Globe and Mail

Canadian retailers are playing a game of musical chairs in their executive ranks as they prepare for a flood of foreign retailers coming to Canada, including the savvy U.S. discounter Target Corp.

On Thursday, Sears Canada Inc. , which has struggled with weak results, appointed a former Loblaw executive to replace Dene Rogers as chief executive officer. Loblaw Cos. Ltd. , which will get a new president this summer, quickly replaced Calvin McDonald, now the new Sears CEO, with Mark Butler, a veteran of the grocer.

Shoppers Drug Mart Corp. and Tim Hortons Inc. are among other retailers now searching for a new CEO.

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"The competitive challenges of the international invasion of Canada ... are creating new retail challenges that are way beyond the traditional scope," said John Torella, a senior partner in retail consulting firm J.C. Williams Group. "Boards have no patience; they want change and they want it fast. It's not status quo. It's a sea change."

The stakes are high for Canadian incumbents, which in many cases face foreign retailers such as Target that are much bigger than they are, with more resources. They feel the pressure to snap up the best executives before a rival comes in and takes them.

As well, some of the retailers hunting for new executives have been stretched recently in their financial results, including Sears and Shoppers. They're feeling the pinch of tightening consumer spending as Canadians focus on paying down debt. And the companies are feeling the effects of changes in their segments and rising competition, feeding the sense of urgency to bolster their business before the landscape gets even tougher.

Target is to open its first stores in Canada by 2013, with plans to convert 100 to 150 of them to its own banner within the next two to three years and more than 200 eventually. In January, it sealed a $1.8-million deal with Zellers Inc. to buy up to 220 of its store leases.

Other foreign retailers moving into Canada including lingerie specialist Victoria's Secret and home improvement chain Lowe's Cos., while discounter Kohl's, high-end department store retailer Nordstrom and J. C. Penney are among other chains looking for space here.

"Target is one impressive organization," said Rick Chad, president of executive recruiter Chad Management, who is helping the U.S. company find personnel. "They're focused and they have a plan and they're coming in a big way. It will have an effect on a lot of the players."

Sears is considered to be one of the retailers that could be hurt most by Target's entry. "Sears is a train wreck and it's only going to get worse for them," said Jeff Doucette, a principal in Calgary-based consulting firm Sales Is Not Simple. "It's an interesting challenge."

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Still, Sears scored well by picking up Mr. McDonald as its new CEO, he added. With Loblaw for 18 years, Mr. McDonald headed its conventional grocery business and was probably a candidate to replace Allan Leighton as president. Instead, the country's largest supermarket retailer went outside the company and chose Spanish native Vicente Trius, who had previously had leadership experience at Wal-Mart Stores Inc.

In a statement, Mr. McDonald said: "The [Sears]executive team shares the board's and my belief that Sears Canada has the potential to significantly increase its sales and profitability by better serving customers, by improving our brand offerings, by executing at a higher level ... and by capitalizing on the affinity and affection that we Canadians have for this iconic retail brand."

He said he looked forward to working with Sears' suppliers "to achieve profitable and sustainable growth together." Sears has upset its suppliers over the past couple of years by, according to the vendors, changing the terms of their contracts unilaterally because of the stronger Canadian dollar against the U.S. greenback.

The shakeup at Sears comes just over a month after it reported that its first-quarter loss grew to $49.5-million from $8.8-million a year earlier, while sales dropped to $992.5-million from $1.068-million. Sales at stores open a year or more - considered a critical retail measure - fell 9.2 per cent.

A day before Sears announced its disappointing results, it made another executive change in appointing a former fashion executive as chief administrative officer.

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