Back to top

Will Nordstrom Win When Target & Sears Failed in Canada?

Read MoreHide Full Article

There seems to be something about Canada that is attracting retailers to the land. On reading the trends, we note that many U.S. retailers have made and are still making attempts to expand in that part of the world. What is it that’s so alluring about Canada?

One reason could possibly be the proximity of the country’s largest metro areas to the American border. Thanks to this advantage, the Canadians are well-versed with various U.S. retail names and their products, which clearly increase chances of their success in the country. This, clubbed with relatively less competition in Canada’s retail market (compared to the U.S.), was reason enough for retailers to make an entry here and expand in the region.    

Well, expanding successfully in Canada is definitely easier said than done. This becomes more evident from failed attempts by companies like Target Corp. (TGT - Free Report) and Sears Holdings Corporation , which tried all means to grasp footing in Canada but ultimately landed in a soup. While these companies had a tough time in the Niagara Falls country, Nordstrom Inc. (JWN - Free Report) ) has recently popped up on the forefront, smartly expanding its operations in the region.

What Weighed Upon TGT & SHLD?

Some reports suggest that Target’s differentiated pricing and merchandise from its domestic country put Canadian customers off, whereas others highlighted that this Minneapolis-based departmental store retailer spoilt things in haste, by selecting wrong store locations and over-speeding the expansion process. On the other hand, Sears Holdings struggled with high labor costs, and had to shut down its Sears Canada division as part of cost-cutting and business revival efforts.

Where does Nordstrom Stand?

Nordstrom, which has been eyeing Canada for quite a while now, had first announced plans to expand in the country in 2012, and launched its first Canadian store in Sep 2014 – at CF Chinook Centre in Calgary. Standing in 2016, Nordstrom has so far introduced only four full-line stores in the country, with plans of opening two more through fiscal 2017. This highlights how this fashion specialty retailer is executing this strategy slowly, learning from the mistakes made by its fellow firms. In fact, Nordstrom’s choice of location testifies to this yet again.

The company recently introduced a store in Toronto, at CF Toronto Eaton Centre, which ranks among the top 10 most productive malls across North America. This store, which also marked Nordstrom’s second global flagship location, is likely to draw traffic, given its strategic location, products ranging through all kinds of prices and special services.

Apart from expanding full-line stores, Nordstrom is also on track to achieve its target of opening 15 Rack stores in Canada. Notably, the company envisions a $1 billion sales opportunity from its expansion in Canada by 2020. All said, we believe that not taking Canadian expansion as a cake-walk, and instead handling it tactfully should prove profitable for Nordstrom.    

Some Other Players

While the aforementioned companies set examples of extending their footprint into Canada directly, some others went for prudent buyouts of existing Canadian ventures to gain exposure. The acquisition of Zale Corporation by leading jewelry retailer, Signet Jewelers Limited (SIG - Free Report) and Victoria's Secret owner, L Brands, Inc.’s (LB - Free Report) takeover of the Canadian La Senza chain, bear evidence to this fact.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>  

More from Zacks Analyst Blog

You May Like