Blog

For Nordstrom Rack, Canada is a moving target

April 8, 2014 by Lisa Biank Fasig — Director, JZMcBride and Associates

Canadians love their hockey, doughnuts and the metric system, but they apparently are not appreciating the fluorescent glow of a good American value.

Nordstrom Rack, one of the nation's most popular low-priced chains — particularly for its shoes — is putting off its planned expansion into Canada by two years. This comes after Target, which entered the northern country in 2013, posted a $1 billion operating loss there, and forecasts more losses in 2014. (These are in U.S. dollars.)

Seattle-based Nordstrom said it is delaying the opening to focus on its full-line department store expansion into Canada. It plans to open six Nordstrom department stores there beginning in the fall, representing its first designer-clad foot outside of the United States.

Not that Rack doesn't pull its own weight. The 140-store chain generates sales of $550 per square foot, according to Nordstrom, and accounted for $2.7 billion of its $12 billion in sales in 2013. That's a lot of marked-down Manolo Blahniks.

Nordstrom is in fact accelerating the pace of store openings here, with 27 new Racks planned in the U.S. for 2014, according to its first quarter earnings report. Nordstrom had planned to open 230 locations by 2016.

All of which speaks to the promise of Rack in Canada. The challenge is not that Canadians prefer to pay top dollar — they do not. But they do prefer a roll out to be precise, and the brand experience to deliver. Target plowed across Canada with 124 stores in less than a year, but shoppers complained the prices were not as good as those in the U.S., and the merchandise variety narrower. Target simply could not get some U.S.-made products distributed into Canada.

Nordstrom may be anticipating similar challenges as it prepares to open its first store, in Calgary, in the fall. It has estimated a 2014 earnings loss related to its Canadian expansion of roughly $35 million. With so much invested in its full-line department stores, why risk the integrity of the Rack name?

Canadians may like hockey and doughnuts, but they also like, and demand, proper respect. Being just north of their more powerful neighbor, they wouldn’t take well even to the notion that we would bring them something that is marginally inferior to what we'd give ourselves.

Hopefully, Manolo will make snow boots.

About Lisa Biank Fasig

---

None

Connect with Lisa: