Given Target Corp.’s $1.8 billion purchase of Zellers Inc. from parent Hudson’s Bay Co. and Dollar Tree’s $62 million October acquisition of Vancouver’s Dollar Giant, U.S. retailers are clearly looking north to Canada for expansion.
“We’re in a period of radio silence when they say they’re coming and then they disappear and do the work behind the scenes and the next thing you know they’re announcing a new store,” said James Smerdon, director of retail and strategic planning at Colliers International Consulting.
He believes Canada’s comparatively strong economy and rapidly rising dollar provide an irresistible opportunity for U.S. retailers.
Confirmed U.S. retailers coming to Canada include:
- J.Crew Group Inc. (NYSE:JCG);
- Zumiez;
- Express, Inc. (NYSE:EXPR); and
- Ascena Retail Group (Nasdaq:ASNA)’s Justice stores.
TJX Companies, Inc. (NYSE:TJX) has enjoyed success across Canada with its Winners and HomeSense divisions.
It recently launched its Marshalls name brand discount retail store in Ontario with three openings.
Smerdon believes TJX will expand Marshalls to Vancouver.
“Vancouver is typically second or at least in the top three locations in Canada that U.S. retailers will look at.”
TJX’s T.J.Maxx brand might also roll into B.C. given that the province is listed in the chain’s drop-down menu even though no store openings have been announced.
One unknown is whether U.S. retailers will choose to branch into Canada via U.S.-style premium outlet malls that developers such as RioCan Real Estate Investment Trust and Calloway Real Estate Investment Trust are starting to build.
The malls are expected to house U.S. retailers who are not yet in Canada.
Saks Fifth Avenue (NYSE:SKS) is rumoured to be planning to enter Canada soon through such a mall, but the company’s senior vice-president of investor relations and communications told Business in Vancouver, that the company has made no announcement about entering Canada and doesn’t comment on rumours.
Nordstrom Inc. (NYSE:JWN) is similarly expected to announce plans soon to open a downtown Vancouver location.
Its real estate scouts attended the International Council of Shopping Centers conference in Whistler earlier this year and let slip that they were looking at potential expansion.
However, spokesman Colin Johnson was more circumspect.
“We’d sure like to find a better way to serve our Canadian customers,” he said. “[But] I won’t be able to speculate on our store growth. We don’t respond to rumours.”
Similar speculation swirls around Dick’s Sporting Goods (NYSE:DKS), Kohl’s Corp. (NYSE:KSS), J.C. Penny Co. Inc. (NYSE:JCP) and the Container Store.
“There’s going to be such a wave of U.S. retailers sweeping through Canada in the next decade. You can almost guess that if you see an American retailer on a good run, chances are that they are starting to look at Canada,” Vancouver retail analyst and DIG360 Consulting Ltd. principal David Gray said while on a business trip to California.
Gray believes competition in Canada lags far behind that in the U.S.
“Some U.S. retailers might have a harder time because of our economics. We don’t have that many ultra-high-wealth people in Canada,” he said. “So, Neiman Marcus [Group Inc.] (NYSE:NMG.B), I kind of doubt it. But J. Crew definitely. Canada is more middle class and it has an upper middle class, so Nordstrom would be OK.”
That said, however, Gray recalls predicting in the late 1990s that Nordstrom would branch north from its Seattle headquarters. He still believes that if the company launches in Canada, Vancouver would make a great first location because it could be run seamlessly out of Seattle a short drive away.