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The Men's section of Nordstrom in Ottawa, March 4, 2015.

Dave Chan/The Globe and Mail

U.S. upscale department-store retailer Nordstrom Inc. will launch its first discount Rack outlet in Canada at one of the country's busiest intersections.

Blake Nordstrom, co-president of the Seattle-based retailer, said the first Rack will be located at Bloor and Yonge Streets in Toronto – at 1 Bloor St. E. – just steps from the tony Mink Mile, where Holt Renfrew & Co. and other luxury retailers have flagship stores.

The Rack store will open in 2018, which is a delay of about two years from when Nordstrom originally said it would launch its first Rack, he said. The delay is because of the large number of "complexities" and expenses in setting up shop in Canada, he said. "It's more important that we get it right," he said in an interview.

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Nordstrom opened its first store in Canada in Calgary in the fall of 2014, with another in Ottawa and then one in Vancouver the following year. This fall it will open two stores in Toronto and, in 2017, another in that city.

The Rack outlet will enter an increasingly crowded market as rival Hudson's Bay Co. launches its first Saks Fifth Avenue store in Canada on Thursday and its first Off 5th discount outlets later this year.

Rack is among a fast-growing segment of "off-price" retailers that sell goods with prominent brands at attractive discounts. Retailers often use their off-price stores to clear unsold merchandise at their conventional outlets. Off-price stores often outperform their sister full-line counterparts; for example, in 2014 Rack stores generated $552 (U.S.) sales per square foot compared with $371 at its conventional namesake stores, company data show.

HBC had planned to launch its first Saks store in Canada at the corner of Yonge and Bloor, where it currently runs a Hudson's Bay outlet. But HBC governor Richard Baker changed his mind and is locating the first Saks within the Hudson's Bay flagship store on Queen Street West. Landlord Cadillac Fairview Corp. offered HBC a $650-million deal he couldn't resist for the Queen Street building and connecting office tower. And Cadillac Fairview had wooed Nordstrom to the adjoining CF Toronto Eaton Centre, turning it into a more upmarket shopping destination.

The first Saks Fifth Avenue is set to open on Thursday on Queen Street, with the second to launch a week later at Toronto's CF Sherway Gardens mall.

Toronto's Yonge and Bloor intersection is bustling with new construction, with other new retail space planned. The Rack store will be on two storeys, starting at street level.

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