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Jacob could be the first of a string of ailing retailers to close their stores.GRAHAM HUGHES/The Canadian Press

The bankruptcy of fashion retailer Boutique Jacob Inc. threatens to put landlords in the difficult position of being unable to fill many of the insolvent chain's 92 soon-to-be empty stores any time soon.

U.S. retailers are more reluctant to set up shop in Canada than they were in the past five years as they start to enjoy a resurgence in business on their home turf. Some have been deterred by Minneapolis-based Target's disappointing – and high-profile – launch in Canada last year.

Now Montreal-based Jacob, which filed for bankruptcy this week, could be the first of a string of ailing retailers to close their stores, leaving landlords with a potential glut of liquidated outlets especially in less popular malls, industry observers warn.

"The landlords are scrambling to try to figure out how they can quickly put into place their contingency plans for Jacob," said Jeffrey Berkowitz, president of retail specialist Aurora Realty Consultants. "If there are others that follow, then it could become a problem."

In the post-recession period, U.S. retailers such as Target were eager to roll out stores in Canada, viewing it as a stronger market than their own as retailers here weathered the downturn better than their American counterparts. But the domestic landscape is getting more crowded and less enticing for U.S. players.

Since 2009, retailers' mall productivity as measured in sales per square foot rose 24 per cent to $475 (U.S.) in 2013 in the United States but picked up at just half that rate in Canada, by 12.2 per cent, to $627 (Canadian) over the same period, according to data from real estate firm Cushman & Wakefield.

"The bounce-back in retail sales productivity in the U.S. has been much stronger as compared to Canada, with most of the rise occurring within the last 24 months," said John Crombie, national retail director at Cushman.

The improving retail environment south of the border and Target's troubles here have made U.S. retailers "take a long hard second look at Canada," said Tom Balkos, Canadian director of retail services at real estate specialist CBRE.

Even so, some Asian and European retailers are still interested in setting up shop in Canada, industry insiders say. The fast-growing Japanese-owned Uniqlo fashion chain has been looking for store sites here and has a spot blocked out in the high-performing Yorkdale Shopping Centre in Toronto in 2016, sources have said.

Uniqlo spokeswoman Eileen McMaster in New York said the company doesn't comment on speculation. But industry insiders said the Jacob store locations are too small for Uniqlo.

Other foreign retailers, including Target and Wal-Mart Stores Inc., have come to Canada by acquiring a Canadian chain's stores. Now Jacob's downfall introduces more potential retail space for a foreign player to take over as a launching pad in this country.

But no obvious suitor is in sight. And Jacob's troubles aren't new: It was under creditor protection since November, 2010, and underwent a major revamping, closing more than a third of its stores. But the company said on Tuesday that it was unable to make the business profitable or find new financiers. It said it was the victim of a challenging economy and influx of new international retailers to Canada.

Other domestic retailers, including fashion chains Le Château Inc., Reitmans (Canada) Ltd. and Danier Leather Inc., also are feeling a pinch. Some U.S. chains are finding it rough here as well. Aeropostale Inc. is closing 27 stores in Canada amid falling sales, said Randy Harris of market researcher Trendex North America in his April newsletter. An Aeropostale spokeswoman did not reply to an e-mail, but the retailer recently said it has 77 stores in Canada.

Ste-Julie, Que.-based Bikini Village "had a terrible year" with sales down 15.2 per cent and same-store sales at outlets open a year or more off 11.5 per cent, Mr. Harris said. "Bikini Village is seemingly a company that, in today's hyper-competitive and fast-changing market, is in danger of being lapped by its competition."

Oxford Properties Group, whose malls house seven Jacob stores, "will evaluate the real estate and determine our best course of action," vice-president of retail management John Giddings said in an e-mail. Cadillac Fairview Corp., another major mall owner with Jacob outlets, would not comment.

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