Why industry observers were not surprised by Nordstrom’s move to close stores in Canada
In one other hit to Canada’s retail sector, Nordstrom introduced on Thursday it could shut all 13 of its Canadian shops, affecting as many as 2,500 jobs within the course of.
The Seattle-based luxury-style retailer made the announcement as a part of its fourth quarter earnings report, with chief government officer Erik Nordstrom saying the corporate “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,” Nordstrom mentioned in a press release.
Now in creditor safety, the corporate is predicted to shut its remaining shops by late June.
Purchases can now not be made on Nordstrom’s Canadian web site. Instead, the web site hyperlinks to a checklist of questions and solutions concerning the tip of the corporate’s Canadian operations.
HOW MANY STORES DID NORDSTROM HAVE IN CANADA?
The firm had six Nordstrom shops in Canada, in addition to seven of its low cost Nordstrom Rack shops.
The upscale chain offered a mixture of designer items. While usually referred to as a division retailer, the corporate has additionally been known as a large-format style retailer.
Nordstrom opened its first Canadian retailer in Calgary at CF Chinook Centre in September 2014.
It has since expanded to incorporate two extra in Alberta, two in British Columbia and eight in Ontario.
“Like everyone, I was shocked and deeply disappointed to receive this news,” Jane Talbot, interim president and CEO of the Downtown Vancouver Business Improvement Association, advised CTV News. One of Nordstrom’s Canadian places is at CF Pacific Centre in Vancouver.
WHAT WILL HAPPEN TO MY ORDER?
Nordstrom shops in Canada will proceed to function as regular in the intervening time, the corporate says on its Canadian web site, and orders positioned on-line earlier than March 2 might be fulfilled.
Customers will have the ability to return or trade objects till March 17. After that date, all gross sales might be last.
Nordstrom will settle for present playing cards for in-store purchases solely up till the tip of the liquidation sale.
WHAT WILL HAPPEN TO MY NORDSTROM NOTES?
Nordy Club Canada members are now not in a position to earn factors as of March 2.
Points earned are redeemed for Nordstrom Notes, which might then be used for purchases.
Nordstrom Notes earned earlier than March 2 might be honoured in-store till the tip of the liquidation sale. Nordstrom will even finish its Visa bank card program.
WHAT DO NORDSTROM’S FINANCIALS SAY?
The announcement got here as Nordstrom launched its fourth quarter outcomes, which embrace web earnings of US$119 million within the interval ending Jan. 28, lower than the online US$200 million earned for a similar interval a yr in the past.
Nordstrom’s CEO mentioned winding down the corporate’s Canadian operations “will enable us to simplify our operations and further increase our focus on driving long-term profitable growth in our core U.S. business.”
The fourth quarter report mentions that Nordstrom opened three shops in 2022 in Los Angeles, Phoenix, Ariz., and Riverside, Calif., and plans to open or relocate one other 20, all within the U.S., this yr and subsequent. Nordstrom closed one in every of its 241 Rack shops within the U.S. final yr.
By closing its Canadian shops, Nordstrom expects to report between US$300 million and US$350 million in pre-tax prices within the first quarter of fiscal 2023 and lose roughly US$400 million in web gross sales.
Nordstrom obtained an order from the Ontario Superior Court of Justice underneath the Companies’ Creditors Arrangement Act to finish its Canadian operations and plans to get courtroom approval this month for a liquidation sale.
WAS NORDSTROM’S DEPARTURE EXPECTED?
For trade observers, the introduced closure of Nordstrom’s Canadian shops would not come as a lot of a shock.
“I think to the average Canadian they’re quite shocked that Nordstrom has decided to exit Canada so suddenly,” Bruce Sinclair, affiliate dean of business advertising and marketing, style and wonder at Humber College in Toronto, advised CTVNews.ca in a video name on Friday.
“But really Nordstrom has always struggled in Canada. Since it entered into the market, it hasn’t been able to turn a profit, so I think that coupled with the challenges of the pandemic really was the final nail in the coffin for Nordstroms in Canada.”
Some have drawn comparisons to the demise of Target in Canada, which in 2015 introduced it could shut all 133 of its Canadian shops after nearly two years of poor gross sales.
While a unique sort of retailer with far fewer places in Canada, Nordstrom’s resolution does level to the problems dealing with the retail sector, which have been exacerbated by pandemic-related closures and now by customers reining in spending in response to inflation and rising rates of interest.
The worth of Nordstrom’s inventory has been shaky in current years. And simply final month, Bed Bath & Beyond Canada was granted creditor safety so it might wind down its operations within the nation.
“Canada really didn’t need this,” retail professional Bruce Winder advised BNN Bloomberg on Thursday. “There’s a lot of bankruptcies right now happening more at the smaller end of retail, but this sends a shockwave through the whole industry and the whole real-estate sector, as well.”
There have been questions round what affect the buy of shares by Canadian investor Ryan Cohen in February had on the choice to shutter Nordstrom’s Canadian operations.
Craig Patterson, writer and CEO of Retail Insider, advised CTVNews.ca in a telephone interview on Friday that the choice to go away Canada was possible made earlier than Cohen entered the image.
Patterson, who has written about Nordstrom for years, mentioned whereas the pandemic was a transparent situation for the corporate, the retail atmosphere additionally was not compelling sufficient for the retailer to proceed working in Canada.
“I do think that a lack of sales obviously was a huge contributing factor to Nordstrom leaving Canada,” he mentioned.
Industry observers additionally level to the tough spot that Nordstrom positioned itself in inside the market — someplace between The Bay and Holt Renfrew or Saks Fifth Avenue — on prime of the competitors confronted by different low cost off-price shops.
“I just don’t think that Nordstrom had the product offering to offer that sort of middle ground, luxury aspirational customer,” Sinclair mentioned.
Nordstrom’s places in fashionable Canadians malls might make it enticing actual property for different firms trying to arrange store or subdivide the area.
Sinclair additionally would not see this affecting the way forward for malls to any nice diploma, which he says are taking a look at different alternatives in residential developments and “experiential” occasions equivalent to The Office Experience.
“Nordstrom really did give it a good try in Canada,” he mentioned. “Canada is a difficult market. We do have lots of competition here and we also have very strong domestic players, which I sometimes wonder if foreign retailers who come into the market recognize how strong our domestic players are.”
With information from The Canadian Press and Reuters
