Nordstrom’s decision to close all its stores in Canada and seek protection from its creditors is just the latest example of a U.S. retailer setting up shop to much fanfare, only to have it all fizzle out.
Less than a decade after launching in Canada, the U.S. chain announced Thursday it will shutter all 13 of its department stores across the country in the coming weeks as it puts its focus on its domestic operations and jettisons a Canadian division that has never managed to eke out a profit.
Court filings show that in 2022, Nordstrom’s Canadian division sold about $515 million Cdn worth of goods. But it lost $72 million while doing so.
The news came as a surprise for many shoppers and employees, but it wasn’t a shock for Liza Amlani, principal and founder of the Retail Strategy Group, because she saw it coming.
“When Nordstrom came into Canada, they scaled way too quickly,” she told CBC News in an interview. The chain launched in multiple cities, and then brought its discount offering Nordstrom Rack to the marketplace too, before the parent stores had even found their footing.
“The challenge with scaling too quickly is that it’s very difficult to understand truly what that customer wants,” she said. “Because a customer in Alberta is very different from a customer in Toronto, who is very different from a customer in Vancouver.”
Amlani says many American retailers make the classic mistake of assuming that whatever they do in the U.S. will work just as well in Canada — and they often pay the price.
WATCH | Retail analyst explains what Nordstrom’s demise means for Canada:
Doug Stephens discusses what Nordstrom’s exit from Canada means for the retail landscape.
Canadians who travel to the U.S. were very familiar with the chain, so she says when its offerings in Canada ended up being a strange mix of higher-than-expected prices and a lot of empty shelves, Canadians rejected it.
Nordstrom fared a little better, but Amlani says in retrospect the chain should have simply opened two stores, perhaps one each in Vancouver and Toronto, while it learned about the market. “Then they would have really been able to build something,” she said.
While the chain made many mistakes along the way, retail consultant Bruce Winder says the main one was that Nordstrom simply misjudged the opportunity presented by the Canadian market.
“They probably just overestimated how rich we are and how much we spend on luxury goods,” he said in an interview. “We just don’t have as many people who would desire that kind of merchandise they needed to break even.”
The pandemic has brought about major upheaval in the retail sector in general, but department stores face even more challenges than most because they are under siege from all sides, Winder says.
Shoppers walk past a Nordstrom department store in Toronto’s Eaton Centre mall. The luxury retail chain announced it will exit the Canadian market, closing all 13 of its stores in the country. (Evan Mitsui/CBC)
Discount stores are eating away their value-oriented customer base from below, while luxury brands are increasingly going direct to consumers instead of through retail channels. And they’re often saddled with legacy costs like rent and store maintenance for their huge storefronts, which makes it hard to pivot on the fly.
“I think the department store is on its last legs,” Winder says. “The business has been under fire through everyone from J.C. Penney to Macy’s and in Canada … Sears, Eaton’s closing years ago … the department store is probably at the last leg of its life cycle.”
That may well be the case, but the chain isn’t pulling its department store model everywhere. The news of the Canadian closures came as the U.S. parent revealed quarterly earnings this week, numbers that showed the chain took in more than $4 billion US in revenue over the busy holiday shopping period, and booked a profit of $119 million.
Those figures topped expectations, but the company has faced pressure from activist investors seeking to reverse a two-year slide in the company’s stock price, which is why Winder speculates that the chain basically gave up in Canada to focus on problems at home.
“What companies do normally when they’re under siege like this, is they start to jettison any assets they can,” Winder said. “Like a ship that’s sinking a little bit, they throw things overboard and … they probably looked at Canada and said, hey, it’s about three per cent of our business, we’re not making money yet, let’s just cut this off.”
Professor Nicole Rourke, who teaches business at St. Clair College in Windsor, Ont., says the rise in online shopping is hurting chains like Nordstrom that have an extensive brick-and-mortar presence and associated costs.
“It’s a tough time to be in the department store industry,” she said in an interview. “E-commerce has really made it very difficult to stay in business and be profitable.”
The chain couldn’t manage to make any more money selling online than it could in its physical stores, and as part of its wind-down in Canada, the chain has actually halted all of its online sales at Nordstrom.ca, even as the physical stores will soon be offering liquidation sales to entice shoppers.
Nordstrom’s inability to make online shopping work for them says a lot about why they went under, because Rourke says the Canadian marketplace is uniquely positioned to be ideal for those who can excel at e-commerce.
“Because we’re so geographically dispersed, we are the perfect setting to do e-commerce in,” she said. “That’s something that’s often overlooked by a lot of American retailers.”
Ultimately, Nordstrom may be destined to be just the latest in a long line of American chains that came north with great expectations, only to fail. “They looked at their product lines, and they just said, You know what, we’re not going to make it in Canada. It’s just not profitable enough for us,” she said.
“They gave it a good old college try but they just couldn’t see the growth potential.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
