Why industry observers were not surprised by Nordstrom's move to close stores in Canada

In another hit to Canada's retail sector, Nordstrom announced on Thursday it would close all 13 of its Canadian stores, affecting as many as 2,500 jobs in the process.

The Seattle-based luxury-style retailer made the announcement as part of its fourth quarter earnings report, with chief executive officer Erik Nordstrom saying the company "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 said in a statement.

• Tailor the news you receive straight to your inbox by signing up for our newsletters

• Download our app to get breaking news alerts delivered right to you

Now in creditor protection, the company is expected to close its remaining stores by late June.

Purchases can no longer be made on Nordstrom's Canadian website. Instead, the website links to a list of questions and answers regarding the end of the company's Canadian operations.

HOW MANY STORES DID NORDSTROM HAVE IN CANADA?

The company had six Nordstrom stores in Canada, as well as seven of its discount Nordstrom Rack outlets.

The upscale chain sold a mix of designer goods. While often called a department store, the company has also been referred to as a large-format fashion retailer.

Nordstrom opened its first Canadian store in Calgary at CF Chinook Centre in September 2014.

It has since expanded to include two more 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, told CTV News. One of Nordstrom's Canadian locations is at CF Pacific Centre in Vancouver.

WHAT WILL HAPPEN TO MY ORDER?

Nordstrom stores in Canada will continue to operate as normal for the time being, the company says on its Canadian website, and orders placed online before March 2 will be fulfilled.

Customers will be able to return or exchange items until March 17. After that date, all sales will be final.

Nordstrom will accept gift cards for in-store purchases only up until the end of the liquidation sale.

WHAT WILL HAPPEN TO MY NORDSTROM NOTES?

Nordy Club Canada members are no longer able to earn points as of March 2.

Points earned are redeemed for Nordstrom Notes, which could then be used for purchases.

Nordstrom Notes earned before March 2 will be honoured in-store until the end of the liquidation sale. Nordstrom will also end its Visa credit card program.

WHAT DO NORDSTROM'S FINANCIALS SAY?

The announcement came as Nordstrom released its fourth quarter results, which include net earnings of US$119 million in the period ending Jan. 28, less than the net US$200 million earned for the same period a year ago.

Nordstrom's CEO said winding down the company'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 stores in 2022 in Los Angeles, Phoenix, Ariz., and Riverside, Calif., and plans to open or relocate another 20, all in the U.S., this year and next. Nordstrom closed one of its 241 Rack stores in the U.S. last year.

By closing its Canadian stores, Nordstrom expects to record between US$300 million and US$350 million in pre-tax charges in the first quarter of fiscal 2023 and lose approximately US$400 million in net sales.

Nordstrom obtained an order from the Ontario Superior Court of Justice under the Companies' Creditors Arrangement Act to end its Canadian operations and plans to get court approval this month for a liquidation sale.

WAS NORDSTROM'S DEPARTURE EXPECTED?

For industry observers, the announced closure of Nordstrom's Canadian stores doesn't come as much of a surprise.

"I think to the average Canadian they're quite shocked that Nordstrom has decided to exit Canada so suddenly," Bruce Sinclair, associate dean of business marketing, fashion and beauty at Humber College in Toronto, told CTVNews.ca in a video call 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 announced it would close all 133 of its Canadian stores after almost two years of poor sales.

While a different type of store with far fewer locations in Canada, Nordstrom's decision does point to the issues facing the retail sector, which were exacerbated by pandemic-related closures and now by consumers reining in spending in response to inflation and rising interest rates.

The value of Nordstrom's stock has been shaky in recent years. And just last month, Bed Bath & Beyond Canada was granted creditor protection so it could wind down its operations in the country.

"Canada really didn't need this," retail expert Bruce Winder told 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 around what influence the purchase of shares by Canadian investor Ryan Cohen in February had on the decision to shutter Nordstrom's Canadian operations.

Craig Patterson, publisher and CEO of Retail Insider, told CTVNews.ca in a phone interview on Friday that the decision to leave Canada was likely made before Cohen entered the picture.

Patterson, who has written about Nordstrom for years, said while the pandemic was a clear issue for the company, the retail environment also was not compelling enough for the retailer to continue operating in Canada.

"I do think that a lack of sales obviously was a huge contributing factor to Nordstrom leaving Canada," he said.

Industry observers also point to the difficult spot that Nordstrom positioned itself in within the marketplace — somewhere between The Bay and Holt Renfrew or Saks Fifth Avenue — on top of the competition faced by other discount off-price outlets.

"I just don't think that Nordstrom had the product offering to offer that sort of middle ground, luxury aspirational customer," Sinclair said.

Nordstrom's locations in popular Canadians malls could make it attractive real estate for other companies looking to set up shop or subdivide the space.

Sinclair also doesn't see this affecting the future of malls to any great degree, which he says are looking at other opportunities in residential developments and "experiential" events such as The Office Experience.

"Nordstrom really did give it a good try in Canada," he said. "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 files from The Canadian Press and Reuters