Nordstrom Shutting Down Canadian Operations

Seattle-based department store chain Nordstrom announced late last week that it will close its operations in Canada because the struggling retailer does not see “a realistic path to profitability” in the Canadian market.

The company is closing its 13 Nordstrom and Nordstrom Rack stores in Canada, resulting in layoffs of 2,500 employees, the company said, according to a report in the Seattle Times.

“This decision will simplify our structure, intensify focus on our growth and profitability goals and position us to create greater value for our shareholders,” CEO Erik Nordstrom said, in a statement.

“”We entered Canada in 2014 with a plan to build and sustain a long-term business there. Despite our team’s best efforts, including multiple initiatives to improve our outcomes, our Canadian business has not been profitable,” the Nordstrom CEO said.

According to the newspaper’s report, Nordstrom has been under pressure to buttress its profitability and shareholder value after waning shopper demand and an inventory glut induced activist investors to take stakes in the retailer.

The announcement of the shutdown of its Canadian stores coincided with Nordstrom’s release of Q4 results that showed a decline in sales that was larger than expected: the 4% YOY drop in sales to $4.2B exceeded the 3.5% fall that analysts were predicting.

In its earnings report, Nordstrom said its biggest losses were in online sales and Nordstrom Rack, which decreased 13% and 8%, respectively. Profits in the fourth quarter dropped to $119M from the $200M reported a year ago.

Nordstrom Canada represents only about 3% of the company’s total sales, with the retailer’s total net sales expected to decline about $400M after the Nordstrom outlets in Canada are shut, a process under Canadian law that will be carried out under court supervision, the report said.

Nordstrom’s e-commerce operation in Canada, Nordstrom.ca, will stop operating, effective immediately, the company said. The in-store wind down is expected to be completed by June.

Nordstrom said it decreased its inventory by 15% in the fourth quarter. In his statement, Erik Nordstrom said high inventory drown price markdowns and depressed financials in previous quarters.

“The biggest factor in our promotions has to do with our own inventory levels. It increased markdown level in the fourth quarter for us, and that was largely our own doing,” Nordstrom said.

Nordstrom operates 335 stores across the US. The company aims to improve results for its off-price Nordstrom Rack outlets by prioritizing 100 strategic brands “that help us drive sales and market,” Nordstrom said.

The retailer is planning to open new Nordstrom Rack outlets in 2023, as well as improve the online and store consumer engagement.