Yahoo Finance Skinny deals at Nordstrom Canada's liquidation sales disappoint shoppers, but industry experts not surprised
Nordstrom Inc.’s countrywide liquidation sale underwhelmed Canadian shoppers with many items discounted by only five per cent, but some experts say this should not come as a surprise from the retailer.
The luxury department store chain began liquidation sales at locations across Canada on Tuesday, offering discounts between five and 20 per cent — not the desperation prices some operations advertise when they are closing.
Shoppers took to Twitter to express their disappointment after learning the markdown on items. One user asked Nordstrom, “How is this a liquidation sale when everything is only 5 per cent (off) at the Yorkdale mall?”
“Went to Nordstrom for their closing sale and it was only 5% off. Glad they going out of business 🙏🏽. Here’s a selfie before I was disappointed,” another posted with a photo.
The reason for the slim discount could be tied to the brand itself. Nordstrom, an upscale chain, primarily sells designer apparel, shoes and accessories. This makes it different from regular retailers and their liquidation sales, said Simeon Siegel, a senior analyst at BMO Capital Markets specializing in retail and e-commerce.
“Nordstrom is liquidating specific stores rather than liquidating the Nordstrom entity. That makes it different than a typical going-out-of-business sale,” Siegel said.
Normally, he explained, liquidation means the company does not care about its future and ‘Everything Must Go’ at whatever the best offered price. That suggests a company going through a normal “going-out-of-business” sale needs to get rid of all of its products and it doesn’t matter how — it simply wants to maximize what it can get for what is left over, Siegel said.
But for Nordstrom, maintaining relationships with the brands it carries — and maintaining its own reputation for luxury — is likely more important than the incremental dollars they’re going to get from liquidating those specific stores, he added.
Nordstrom first set its sights on Canada in 2012, opening its first store in Calgary at CF Chinook Centre in September 2014. Less than a decade later, it announced March 2 that it would wind down Canadian operations, which had grown to include six department stores and seven Nordstrom Rack shops, which sell designer goods at discount prices.
“We made the difficult decision to wind down operations in our Canadian business. This will enable us to simplify our operations and further increase our focus on driving long-term profitable growth in our core U.S. business,” chief executive Erik Nordstrom told investors.
At the time, Nordstrom said it expected the Canadian stores to close by late June and 2,500 workers to lose their jobs. The company required court approval, which it received March 20 from the Ontario Superior Court of Justice, to begin the liquidation because it is winding down its Canadian operations under the Companies’ Creditors Arrangement Act. This helps insolvent businesses restructure or end operations in an orderly fashion.
“Despite our best efforts, we do not see a realistic path to profitability for the Canadian business,” the CEO said, adding that the decision will simplify the company’s structure and create greater value for shareholders.
For its third-party liquidators, the company decided to go with a joint venture comprised of Hilco Merchant Retail Solutions ULC and Gordon Brothers Canada, which were involved in the liquidation of Target, Sears and Forever 21 in Canada, the Canadian Press reported. They will oversee the sale of merchandise, furniture, fixtures and equipment, but not goods from third parties, which removed products this past weekend.
As to whether Canadians can expect better bargains from Nordstrom’s liquidation, the answer is still unclear.
“Many luxury goods that Nordstrom carried were never or rarely discounted, so a small discount is significant,” said Bruce McDonald, president of Silverman Consulting & Retail Services, a consulting firm for retail liquidation sales.
There is “really no normal” in liquidating, he said. It requires taking a look at the history of discounting at the retailer, as well as the value of the goods.
For Nordstrom department stores, discounting was very limited. They did not want to be a discount retailer, McDonald said, noting that when things became out of date or season they moved them to Nordstrom Rack where they would take a discount.
He added that there are often some good deals at liquidation, but in a CCAA proposal, which is part of the bankruptcy act, there are regulations and agreement from creditors is required.
“The stores still must generate enough money to pay the rent, the staff, operating expenses, as well as have something left for the creditors at the end of the day,” McDonald said.
But he noted that as with most liquidation sales, the discount will probably grow as the sale goes on — though best and most desirable merchandise may be gone by then.
Additional reporting by the Canadian Press
• Email: dpaglinawan@postmedia.com | Twitter: denisepglnwn
