Hudson’s Bay Co. _ Zellers Inc.’s parent company _ has been contemplating what to do with the brand since last year when it sold the majority of the leases for its 279 discount stores to Target Corp. for $1.83 billion, said spokeswoman Tiffany Bourre.
“After a lengthy review and numerous discussions with various parties it became apparent that continuing to operate the Zellers banner in its current form was not viable, particularly given the geographic footprint of the remaining locations,” Bourre said.
Most of the remaining stores will be closed by March 2013. Ontario has the largest number of stores slated for potential closure at 29, followed by 15 in Quebec, four each in New Brunswick and Nova Scotia, three each in Alberta, B.C. and Saskatchewan, two in Manitoba and one in PEI.
But Bourre added the company hasn’t ruled out the possibility of maintaining some of the store locations and opening them under another retail banner. Zellers is “considering options” for certain locations, including “rebranding some stores” _ a determination that has yet to be made, she said.
Hudson’s Bay Co. did not provide any indications as to which stores, or how many, would remain open.
Zellers, which offers everything from housewares to hosiery, has faced an onslaught of competition from large U.S. retailers in recent years, most notably from Walmart, which has been expanding into a one-stop destination with dry cleaning services and a full suite of groceries. Zellers was one of the last remaining large Canadian discount retailers after the Woolco, BiWay and Bargain Harold’s brands became extinct years ago.
The company said it operates 64 stores that were not acquired by Target, or were already slated for closure. An average Zellers has about 100 employees.
A spokeswoman for Walmart Canada wouldn’t comment on whether Canada’s largest retailer is interested in acquiring any of the locations.
Target Corp., which plans to open 125 to 135 stores in Canada indicated it has no current interest in acquiring any of the 64 zellers locations.
Target purchased the leasehold interests of 189 sites currently operated by Zellers Inc. and it says about $10 million to $11 million will be invested to remodel each facility.
“Our current focus is on those sites,” said Target spokeswoman Lisa Gibson in an email to the Canadian Press.
The U.S. retailer is poised to begin opening the first of the 125 and 135 stores in Canada at former Zellers locations acquired from Hudson’s Bay Co. The store openings are set to start next year.
Target has said only that Zellers employees would be encouraged to apply for jobs at their stores, but a Zellers employees’ union has launched the Target Fairness campaign to raise awareness about Target’s failure to commit to take on Zellers employees.
But the campaign has achieved little so far. Target has not responded to its demands and Walmart has recently said it won’t automatically hire Zellers employees, said Kevin Shimmin, national representative for UFCW Canada, the union representing employees at Zellers stores in B.C., Quebec and Ontario.
“At the end of the year, you’re looking at probably more than 10,000 Zellers employees that are out of a job,” he said.
Shimmin is worried about the treatment of Canadian retail employees as more Canadian brands disappear and the number of U.S. chains grows.
“It does make a big difference for Canadians working in the retail sector,” he said.
“What we can expect from Target is exactly the same as Walmart, as far as no job security, low wages and part-time work,” he said.
Zellers has been a key part of the Hudson Bay portfolio since 1978, emerging as the company’s discount retail subsidiary by offering clothing and household items at lower price points. It remained in the HBC fold as the company refocused its efforts on its core retail business in the 1980s and 1990s.
In recent years the company has made efforts to revitalize its The Bay stores, hiring former Holt Renfrew executive Bonnie Brooks as chief executive officer, introducing high-end boutique spaces in its Toronto flagship store and securing the rights to produce uniforms and merchandise for Canada’s Olympic athletes.
The sale of Zellers stores to Target has been discussed since at least 2004, when Target was rumoured to be in talks with Hudson’s Bay Co. to buy its Zellers stores.
HBC has said it plans to use the proceeds from the sale to pay down debt and “spend aggressively” on its other brands, including The Bay and Home Outfitters, as well as Lord & Taylor’s in the U.S., adding that an initial public offering of the revamped company is “a very possible scenario.”