MACY'S SAYS "NO" TO CANADA

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Last month we reported that Macy's could possibly open in Canada by buying Sears Canada. We've got an update which may disappoint - Macy's has no interest either in Sears Canada or in opening Canadian stores.

Macy's has been looking at opening in Canada over the years and has examined numerous possibilities, from buying The Hudson's Bay Company to opening newly-built stores at selected Canadian malls. In the early 2000's, Macy's thought it had secured almost 20 Canadian locations within Cadillac Fairview malls. Negotiations stalled and the deal fell through.

Macy's CEO Terry J. Lundgren says that the company no longer has interest in the Canadian retail market, especially now that so many other American retailers have moved north of the border. Nordstrom will open Canadian stores, Saks Fifth Avenue will open within selected Hudson's Bay real estate, and Hudson's Bay itself is similar to Macy's in many ways.

Hudson's Bay and Macy's are both large-format department stores generally catering to the middle market, with some luxury thrown in for good measure. Some of Macy's flagships carry more comprehensive designer selections. Same for Hudson's Bay. Macy's is spending a fortune to renovate its New York City flagship, and Hudson's Bay is doing the same with its Toronto and Vancouver flagships (though not nearly as much as Macy's $400 million Manhattan store renovation, the most expensive in retailing history).

Canada's population is about the same as the state of California's, and our land mass is huge. Canadians' income and wealth is, on average, slightly above Americans. Our population is, however, generally less likely to display expensive designer labels, limiting most of Canada's luxury retailing to Toronto and Vancouver. We may appear to be a desirable retail market, but we're small, spread-out and more likely to save our money or put it into homes and leisure.

Target is already finding its Canadian business challenging, and Nordstrom has expressed frustration coordinating its Canadian expansion. In hindsight, Macy's might be smart not moving into Canada, at least for now.

We don't expect many more foreign department store announcements for Canada in the next while. La Maison Simons is expanding, Holt Renfrew will spend hundreds of millions on store expansions/renovations, and Hudson's Bay will hopefully increase spending on store renovations to bring stores into the 21st century. Buying Saks Fifth Avenue may have been what Hudson's Bay needed for an update, and we'll report more on this soon.

So don't expect Neiman Marcus or Barney's New York to open in Canada, though if they did, we'd be first in line for their openings.

[Macy's website]