Canadian Retail Thread

[miketoronto]

Originally Posted by SSLL

I remember when artisanal booths and second-hand shops filled my local mall

Still, Sephora being in four malls in a metro of more than five million people isn't that bad. There might have been a time when there was just the Eaton Centre store (and maybe Yorkdale), but as the city grows, so do the shopping options.

Well I don't agree with having stores all over. Keep it downtown and thats it.

You go to my dads city in Italy for example, and each store only has one location, and thats downtown. They don't have suburban malls in every little spot like N.A. cities.

I just think maybe Canadian cities should have a little restricions in place.
I know UK cities do, and I think SF was also thinking of starting a law where stores could only open one or two locations.

Do Canadian cities really need GAPS every 5min apart, like now. Its a little much.

[malek]

if there's a GAP every 5 minutes, it means there's a need, there's clientele for it or else it would have shut down.

(i hate GAP btw).

[keninhalifax]

^ They work on the "if you build it, they will come" phenomenon. By gradually expanding into key locations, they essentially create their own clientele niche.

[malek]

Thats part of the equation.

Good for them.

[SSLL]

All part of being in a market economy, I guess. In the UK, it's more size and/or use restrictions rather than the amount of stores in the any given market you can open.

[malek]

Opening of new Omer DeSerres concept in Place Montréal Trust

MONTREAL, April 24 /CNW Telbec/ - Place Montréal Trust, a property held
and managed by Ivanhoe Cambridge, is pleased to announce the opening of an
Omer DeSerres store at the Metro Level (2). The well-known retail chain
specialized in arts and creative leisure supplies is inaugurating a completely
new concept, its first outlet, covering 10,000 square feet of floor space, in
a shopping centre.

"The entry of Omer DeSerres into Place Montréal Trust is a valuable
addition to our Centre," commented Debbie Ruel, General Manager of the Centre.
"It means that our customers working downtown will be able to find their
supplies and the inspiration for their creative leisure activities, while at
the same time being able to access the trend- setting products that they are
looking for."

Omer DeSerres adds its prestige to that of the many well-known superstore
lessees who have made Place Montréal Trust a prime destination in downtown
Montreal: Indigo, La Vie en Rose et Compagnie, Mexx, Winners, and Zara. Its
unique concept perfectly complements the constantly renewed range of products offered by the Centre.

At 4 p.m. on Wednesday, April 26, a press conference organized by Omer
DeSerres will be held to mark the opening of the store. It will take place at
the Metro Level (2). at Place Montréal Trust, and the spokesperson for the
event will be Diane Dufresne. She will be presenting her own exhibition, to be
launched in tandem with the store opening. The public will have an opportunity
to admire her work from April 26 thru May 13 during Omer DeSerres' business
hours.

About Place Montréal Trust

Place Montréal Trust stands in the very heart of Montreal, and attracts
over 14 million visitors a year. Located at the intersection of the major
commercial thoroughfare, Saint-Catherine Street and the prestigious McGill
College Avenue, Place Montréal Trust accesses the two busiest Metro stations
in the underground city within a city. It covers over 265,000 square feet of
rental space, shelters 70 stores and restaurants, and boasts the highest
indoor fountain in North America.

About Ivanhoe Cambridge

Ivanhoe Cambridge, a recognized leader in the real estate industry, is
one of the country's pre-eminent property owners, managers, developers and
investors in Canada. The Company focuses its activities on high-quality
shopping centres located in urban areas. With a strong Canada-wide presence,
the Company is also active in the United States and Europe, where it partners
with several major real estate entities. Its real-estate portfolio consists of
more than 43.2 million sq.ft. of retail space and mainly includes over
65 regional and super-regional shopping centres. As at December 31, 2005, the
market value of Ivanhoe Cambridge's assets reached almost CAD $9.3 billion.

Headquartered in Montreal (Quebec, Canada), Ivanhoe Cambridge is one of
the principal real estate subsidiaries of the Caisse de dépôt et placement du
Québec, the leading manager of institutional funds in Canada. The Company's
shareholders include four major Canadian pension funds. The Company's Internet
address is www.ivanhoecambridge.com.

[SSLL]

From: http://www.thestar.com/NASApp/cs/Content...all_pageid=968350072197&col=969048863851
______________________________

Apr. 27, 2006
TONY WONG
BUSINESS REPORTER

Mall developer goes solo

It's not by choice, but lately Paul Gleeson finds himself in the position of having to pay more attention than normal to his business partners south of the border.

The vice-president of development for real estate developer Ivanhoe Cambridge has an agreement to build three giant malls across Canada with Arlington, Va., based Mills Corp. similar to their first major joint venture, Vaughan Mills.

Despite a sluggish start, the mall, just north of Toronto, has emerged as one of the more successful retail operations to open in the Greater Toronto Area and the first enclosed centre to open in 14 years.

But Mills Corp., which has been credited with revolutionizing the retail business by promoting the idea of shopping as entertainment, finds itself on financially shaky ground of late.

Hedge funds are hovering, a sale of the company may be imminent and the U.S. Securities and Exchange Commission has launched an investigation of the company's accounting practices.

"We are obviously watching closely what's happening," Gleeson said in a recent interview. What transpires will affect Ivanhoe Cambridge.

But in a candid moment, Gleeson makes one thing clear: Ivanhoe Cambridge plans to go ahead with plans to build more malls, whether its U.S. partner is along for the ride or not.

"Hopefully, they will be aboard, but we believe in the concept and we are prepared to do it on our own," says Gleeson. "Our agreement does not prevent us from building centres in Canada that are similar to Vaughan Mills."

A Mills Corp. spokesperson was not available for comment yesterday.

Ivanhoe Cambridge is a subsidiary of Quebec pension fund Caisse de dépôt et placement du Québec. Development costs for Vaughan Mills of $355 million were split between the two companies, which each have a half ownership.

Ivanhoe has a master agreement with Mills Corp. to build sites in the Calgary, Montreal and Vancouver areas. One location, just outside Calgary, is currently undergoing zoning for a 1.1 million square foot centre slotted for construction this year and a summer 2008 opening, says Gleeson.

"It's business as usual."

No one doubts Ivanhoe Cambridge has the financial muscle to go it alone. The company has a portfolio of 43 centres with a market value of $7 billion. But some industry insiders are wondering whether the company has the expertise to attract and package the big U.S. retailers, which has been a specialty of the Mills Corp. team.

At the moment, Mills staff continue to work with Ivanhoe Cambridge staff, Gleeson says.

"We are quite prepared to deliver a Mills-type project moving forward," Gleeson says. "Both companies had active roles in developing Vaughan Mills, and we will be using essentially the same team to deliver the other projects."

Gleeson says Ivanhoe Cambridge was active in small store leasing, while Mills was more involved in trying to attract big American retailers.

The 1.2 million-square-foot Vaughan Mills project near Canada's Wonderland has become a popular draw for tourists and shoppers with retailers such as Bass Pro Shops Outdoor World and Holt Renfrew Last Call.

The venture has been so successful that Ivanhoe Cambridge may expand the mall by another 200,000 square feet, he says.

(The largest mall in Canada and the world remains the West Edmonton Mall at 3.8 million square feet.)

Still, while Vaughan Mills has been a financial success for both companies, it took eight years to get off the ground.

"It did have its challenges finding tenants and it was struggling to get up to a decent opening at first," says John Crombie, national retail director for real estate company Cushman & Wakefield LePage Inc.

"I think they were hoping to get a lot more established American brands across the border."

But while some of the bigger American retailers may have decided to stay away, the mall has flourished in an environment that has been extremely favourable to retail, says Crombie.

"If they decided to sell, there is a lot of money out there looking to buy good quality retail," Crombie says.

"Have values gone up since they built? The Canadian story is still sound because this is quite a valuable asset," says Jamie Ziegel, vice-president of investment for Cushman & Wakefield LePage.

A recent study by Ryerson University shows that suburban shopping centres dominate retail in the Greater Toronto area as the population moves from around 5 million today to a projected 7.5 million in 2030.

"This provides lots of opportunity for developers to create the kind of lifestyle malls and entertainment centres since much of this growth is in the suburbs," says Tony Hernandez, director of the Centre for Commercial Activity at Ryerson University.

Hernandez says one reason for the success of Vaughan Mills is that it manages to differentiate itself from other Canadian malls.

"A typical Canadian mall has a degree of sameness to it, with similar retailers, but Vaughan has managed to offer something different," Hernandez says.

Gleeson would not comment on whether Ivanhoe Cambridge would purchase the half ownership of Vaughan Mills that it does not already own.

"There is normally some kind of provision set up that if something were to happen to one partner, the other partner would have the first chance to buy into the asset," says Cushman's Ziegel.

Last month, the U.S. Securities and Exchange Commission launched an investigation into Mills Corp.'s accounting practices.

The company said in January that it would restate financial results for 2000 through 2005 because of accounting errors, its second restatement in less than a year.

Earlier this year the company said its board hired Goldman, Sachs & Co. and JP Morgan Securities Inc. to look at strategic options including selling the company.

The stock has plummeted by more than half over the last year and one in five employees have been laid off in a massive restructuring.

Analysts say the company expanded too fast into markets that were too small to support the mammoth "shoppertainment" structure that the typical Mills mall needed.

Gleeson said unlike the U.S. market, malls such as Vaughan Mills are still unusual in Canada.

[SSLL]

http://www.thestar.com/NASApp/cs/Content...all_pageid=991479973472&col=991929131147
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Naked truth about Bloor St.
Apr. 27, 2006. 01:00 AM
BERNADETTE MORRA

Talk among a certain crowd is that Bloor St. has lost its lustre.
Wrong.
It might appear as much with a couple of empty storefronts in spitting distance of Gucci, the departure of Sporting Life from the corner of St. Thomas St., the impending departures of Betty Hemmings Leathergoods and Georges Rech and the recent exit of Marina Rinaldi.
But any talk of trouble is completely incorrect.
"Bloor St. had a great year last year," says commercial real estate broker Jordan Karp, on a little spree of his own in the vicinity of $650 Prada polo shirts at Holt Renfrew on Saturday. "No one is complaining. And the rents are reflecting that."
For the first time Bloor St. broke the $200 a foot barrier, with the arrival of Mappins jewellers last year. Leases are generally renewing in the $175 net and up range, Karp says.
Some are balking and walking. But for every retailer fed up with rising rents, there is another willing to pony up for Toronto's premier retail strip.
Among them:
Sephora will open on the south side of Bloor St. east of Louis Vuitton, Chanel, Hermès and Prada. The French beauty giant, owned by LVMH, is displacing Corbo, Georges Rech, and Betty Hemmings.
Mendocino is opening a 3,000-square-foot shop flanking the entrance of The Colonnade to the west. Upstairs, in the defunct Patriot restaurant, celebrity chef Wolfgang Puck will open a splashy new eatery that hopes to be up and running for the Toronto Film Festival.
Coach will replace Town Shoes once the latter's lease is up. Expect a cushy Coach flagship in early 2007.
Chanel and Harry Rosen are both investing in their current digs. Though nothing is official yet, CEO Larry Rosen does confirm an update to the flagship, possibly with the addition of another selling floor. The 16-year-old Chanel boutique which added a second floor in 1997, will undergo a major overhaul next year.
"There will be a complete change to bring our flagship on par with the look of Chanel boutiques around the world including New York, Bal Harbour, Rue Cambon and Avenue Montaigne," says Anny Kazanjian, executive director of public relations for Chanel Canada. Plans for the Peter Marino-designed Zen-style space are still on the drawing board, and the firm is deciding whether it will have to close altogether or relocate to some other part of The Colonnade during construction.

[SSLL]

From: http://www.canada.com/nationalpost/financialpost/story.html?id=587bd009-615b-4619-8bda-82bda3305d31
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Chain aims to ride Mizrahi's buzz
Fairweather group

Hollie Shaw, Financial Post
Published: Saturday, April 29, 2006
Not content to sit by while foreign rivals selling 'cheap chic' fashion swept into Canada, executives at Fairweather Group scored an exclusive deal with celebrity fashion designer Isaac Mizrahi to bolster the clothing chain's style quotient and give it some much-needed buzz.
The womenswear chain and its Quebec-based counterpart, Les Ailes de La Mode, recently debuted the Brooklyn-born maven's exclusive Canadian fashion line, boasting flirty summer styles at compellingly low price points.
"We feel the future of retail is in exclusive branding," said Kimberly Branch, general manager of Fairweather.
"The market in Canada has become globally competitive with the introduction of Mango, Zara and H&M and we wanted something to set us apart. We wanted to offer [customers] something exclusive, a designer they couldn't get anywhere else."
Mr. Mizrahi, a media-savvy personality who began his career in high fashion and now produces a mass line of clothing, accessories and home furnishings for U.S. Wal-Mart rival Target Corp., launched the line of 50 cotton and linen separates based around a black and white palette with floral prints and accents of poppy red and key lime green.
Prices for the line, including t-shirts, polos, skirts, dresses and trench coats, range from $12.50 to $79.50. The styles are showcased on a series of giant billboards across the country alongside head shots of the arch, curly-headed designer.
Mr. Mizrahi's Canadian debut coincides closely with the launch of Joe Fresh Style, homegrown fashion designer Joe Mimran's apparel line, at the general merchandise superstores owned by grocery giant Loblaw Cos. Ltd.
While Target successfully positioned itself as the stylish answer to Wal-Mart by signing exclusive deals with a handful of high-end apparel, furniture and housewares designers, such as Philippe Starck, Michael Graves and Cynthia Rowley, Swedish fashion giant H&M has generated a lot of hype showcasing one-off collaborations with designers Karl Lagerfeld and Stella McCartney.
H&M and the low-priced apparel chain Old Navy have had a powerful impact on the shopping habits of Canadians looking for affordable fashions, and Canadian retailers, from specialty boutiques to department stores, have taken notice.
Department stores and mass merchants have pursued numerous exclusive branding agreements with celebrities and designers in the past five years; Wal-Mart Canada sells a line overseen by Mary-Kate and Ashley Olsen; Sears Canada sells the Martha Stewart line of home goods and Canadian Tire developed a line of paint and home accessories with Debbie Travis.
Mr. Mizrahi, who signed a five-year agreement with Fairweather after he was sought out by the chain's executives, said he was never approached to sell his Target line at Zellers, owned by Hudson's Bay Co.
Industry consultants had expected the line to show up at Zellers, which sells several lines available at Target, including Mossimo and Cherokee.
Fairweather Group will begin selling Mr. Mizrahi's line of home decor and accessories late this summer at its decor and housewares chains Benix & Co. and Barnes and Castle.

[SSLL]

From: http://www.theglobeandmail.com/servlet/story/RTGAM.20060503.wsears0503/BNStory/Business/home
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Sears investors eye HBC
Canadian Press
Toronto — In a continued spat over Sears Holdings Corp.'s attempted buyout of Sears Canada Inc., a group of minority shareholders contesting the bid have floated the idea the retailer could be combined with competitor Hudson's Bay Co.

The group of shareholders, led by Pershing Square Capital Management LP, on Wednesday rejected a statement earlier this week from Sears Canada's Chicago-area parent company accusing them of attempting to push up the price of the takeover offer.

They also suggested that “based on a conversation with a former Hudson's Bay Co. senior executive, Pershing believes that a business combination between Hudson's Bay and Sears Canada could yield an additional $300-million of savings from the combined enterprises.”

The minority group did not identify the former executive.

On Monday, Sears Holdings vice-chairman Alan Lacy accused “Pershing and some other U.S. speculators” of delaying the proposed acquisition “in an attempt to extract a premium on shares they purchased recently at prices close to the final offer price of $18 per share.”

The minority shareholders, who also include Hawkeye Capital Management LLC and Knott Partners Management LLC, reiterated in a release that they believe the sweetened Sears Holdings offer of $18 a share undervalues the Canadian firm.

It accused Sears Holdings of being “motivated by its desire to squeeze out minority shareholders at a price that is a small fraction of the fair value of Sears Canada before including any synergies that can be obtained through 100 per cent ownership by Sears Holdings.”

The group noted that each member has held Sears Canada stock since early 2005, “more than one year before Eddie Lampert, chairman of Sears Holdings, attempted to acquire his first share of Sears Canada in the recent bid.”

“Members of the minority group intend to remain long-term holders of Sears Canada as a publicly traded company if they are successful in defeating the minority squeeze out transaction,” it added.

Pershing Square values Sears Canada stock's fair value at between $41.21 to $46.67 per share.

Sears Holdings Corp. is the third largest broad line retailer in North America, with approximately $55-billion in annual revenues, and 3,900 full-line and specialty retail stores in the United States and Canada.

[SSLL]

From: http://www.theglobeandmail.com/servlet/story/RTGAM.20060505.wxr-cover06/BNStory/Business/home
_________________

Titans collide in battle for Sears Canada

ANDREW WILLIS
From Saturday's Globe and Mail
E-mail Andrew Willis
| Read Bio

| Latest Columns
For two guys who just doubled their money on Sears Canada — a $300-million score — Jacques Chartrand and Claude Boulos can sure point to a lot of things wrong at the retail chain.

As the heads of Natcan Investment Management's $6.5-billion Canadian equity fund, the two money managers helped kick off the bitter takeover battle for Sears Canada by agreeing to sell their 9.7-million-share stake in the stores to its U.S. parent. Natcan headed for the exits in return for $16.86 a share, and was thrilled at the price. “Same-store sales keep falling. Canadians are going to the power centres, to big-box stores, so the traffic is going down at the malls where you find Sears,” says Mr. Chartrand, ticking off challenges facing the venerable retailer. “Management has tried different approaches, nothing has worked, and they are a bit complacent. I mean, this has got to be the last North American retailer with its own fleet of trucks.”

Given their pessimistic outlook, the Natcan team was all ears when they got a call last November from William Crowley, chief financial officer at Sears Holdings Corp., the U.S. parent of Sears Canada, and a partner in its controlling shareholder, ESL Investments, a $15-billion (U.S.) hedge fund run out of Greenwich, Conn., by billionaire Edward Lampert.

Backing up Mr. Crowley in presentations before the Sears Canada board, the Natcan executives had already helped push the $2.2-billion (Canadian) sale of Sears Canada's credit card division, and a subsequent $2-billion special dividend.

After three weeks of “tough, creative negotiations,” Natcan agreed to sell its 9-per-cent stake — acquired over two years ago for $150-million — to Sears Holdings. That set the stage for the parent firm's offer for the rest of the company. The moment that bid was announced, there was a flood of investors who play on the theory that motivated buyers such as parent companies will invariably dig deep, and improve their opening bid to get a deal done. The most sophisticated of these players are known as arbs, or risk-arbitrage hedge funds.

“We got a fair price, plus protection if a second bid was made,” Mr. Boulos says. “The arbs, they poured in because the statistics show that they can get a 10- to 15-per-cent bump in the bid.”

The arbs drove Sears Canada stock over $18, where it has remained since December. In April, Sears Holdings did improve its offer to $18 and won support from other major investors, with Natcan also getting the sweetened price. But at that point U.S. hedge fund Pershing Square Capital Management LP went on the offensive.

After buying shares at around $18, Pershing began making strident arguments that the Canadian chain is worth up to $46 a share. On the phone with Montreal-based Natcan, you can almost hear a Gallic shrug as Mr. Boulos says: “They can always dream.”

Just about every takeover of a Canadian subsidiary by a foreign parent — and there have been more than a dozen in the past decade — has seen tension between minority shareholders and the buyer. Occasionally, takeover bids don't get improved, and arbs get hammered, as they did when Rogers Communications dropped an offer for its wireless unit. Sometimes, the arbs clean up, as witnessed in the bidding war for Dofasco.

But no takeover has approached the flat-out nastiness of the Sears Canada fight. Hedge funds now control trillions of dollars and have become a major factor in capital markets around the globe. In Canada, we are finding out what happens when two of these powerful players go toe-to-toe.

This battle has grown so ugly that some combatants have withdrawn from the field. Sears Canada's independent directors quit the company rather than endorse the $18 offer. Said one source close to the board: “We just weren't going to be pushed around.” On Tuesday, there will be a meeting at which Mr. Lampert is poised to get full control of the board.

Bystanders are being wounded. Sears Holdings unleashed its lawyers at Osler Hoskin & Harcourt to wring an apology from Ron Mayers, head of alternative strategies, at Desjardins Securities who questioned the takeover tactics. Regulators are also being summoned. When Pershing Square and its allies dragged the Ontario Securities Commission into the fray, Sears Holdings shot off a press release asserting the hedge funds are trying to “change the law to bail them out of their mistake.”

Pershing Square, run by New York-based William Ackman, responded with its own release, labelling the assertions “vituperative.” That means abusive. That nine-page missive also referred to Mr. Lampert as “Eddie.” Friends can use the nickname. Coming from Pershing Square, sources close to ESL said it was an attempt to get under Mr. Lampert's skin.

The battle of egos, and thesauruses, is about more than chest-thumping by money managers.

Both Mr. Ackman and Mr. Lampert know their ability to do successful deals in the future — to sway boards or raise money — depends in part on burnishing their reputations as winners at Sears Canada. One source close to ESL said: “Lampert doesn't ever want to be known as a guy who rips off public shareholders. He's likely to be in Sears Holdings for a long time, and he plans to be in business a long time.”

The rhetoric has grown louder as Pershing Square suffers setbacks. In fact, Mr. Ackman may eventually lose out because he was too clever for his own good.

Pershing Square directly owns 5.6 million Sears Canada shares, bought after the takeover was launched. But the fund also bought 5.3 million shares last year. To legally avoid paying about $20-million in Canadian tax, it entered into what is known as a swap agreement. That deal saw Pershing Square hand over its 5.3 million Sears Canada shares to a Florida bank, SunTrust Banks Inc. In exchange, the fund got a note that entitled it to any future increase in Sears Canada's share price.

The only downside to this swap was Pershing gave up the right to vote the shares. But in a number of interviews, Mr. Ackman said market convention would see those 5.3 million shares either voted his way, or at least not voted at all.

Executives at several Canadian bank-owned dealers, all of whom routinely do these tax-based transactions on dividend-paying stocks, say Mr. Ackman has it wrong. The owner of the shares must be free to vote as it sees fit, they say — otherwise, the swap agreements might be considered tax fraud.

So who ended up owning the shares that Pershing Square swapped? That's a hotly debated subject. Pershing Square says the block ended up with Bank of Nova Scotia, an allegation both the bank and Sears Holdings deny. Mr. Ackman's best hope of torpedoing this takeover lies in attacking Scotiabank's role.

For what no one disputes is that the bank bought 4.5 million Sears Canada shares as part of a tax-driven trade. When Scotiabank decided to tender its big block to the $18 bid, it paved the way for Sears Holdings to squeeze out the remaining minority investors.

The other fact that's not in question is that Sears Holdings struck its deal with Natcan, then hired Scotiabank's investment dealer arm, Scotia Capital, as adviser on its takeover offer. Sears Holdings sources say they had no clue the bank owned Sears Canada shares, and point out that they also interviewed Merrill Lynch and BMO Nesbitt Burns for the job.

Scotiabank spokesman Frank Switzer said the two arms of his bank acted “with the utmost integrity.” But the two roles in this takeover opened the door for Pershing Square to claim Scotiabank had a conflict of interest. If Pershing Square can persuade the OSC to somehow toss out Scotiabank's 4.5 million votes, then Sears Holdings is no longer able to roll up the rest of the minority shareholders. To make the whole thing even more delicious, the chairman of the OSC is former Scotia Capital chief executive officer David Wilson.

For all its troubles, Scotia Capital stands to earn the Bay Street equivalent of minimum wage. The investment bank only stood to make a lucrative success fee — in the $3-million range — if Sears Holdings was able to get the chain for the opening bid of $16.86, according to sources at the bank and the American company. With the offer now at $18, Scotia Capital will receive a far more modest stipend. Short of a major reversal at the hands of the regulators, Sears Holdings will take over its Canadian subsidiary early in the new year. A prolonged court fight with Pershing Square is cheaper than an improvement on the $18 bid, sources at Sears Holdings say.

What happens next — how Sears will beat back Wal-Mart and a planned Canadian invasion by archrival Lowe's Cos. Inc. — is the subject of enormous debate in retail circles.

Pershing Square pushes the idea of a merger with the troubled Bay and Zellers chains, which were recently taken private by American investor Jerry Zucker. An investment banker who has been through the books of both the Bay and Sears Canada says that while there's no point in putting the chains together, “once everything is private, you're going to see all sorts of wheeling and dealing with the Bay and Sears stores. You'll see Loblaws buy 25 locations, Shoppers, Canadian Tire, even Wal-Mart will buy a few.”

The investors who did so well with Sears Canada as a public company say it now makes business sense to say goodbye. Natcan's Mr. Chartrand says: “The next step has to be as a private company. Do that, and you can better deploy capital, you can combine the two companies' purchasing for more clout with suppliers, and combine merchandising. But it has to be private.”

[SSLL]

From: http://www.thestar.com/NASApp/cs/Content...all_pageid=968350072197&col=969048863851
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Loblaw eyes hungry condo dwellers
May open smaller stores downtown Long restructuring
nearing an end
May 5, 2006. 06:52 AM
DANA FLAVELLE
BUSINESS REPORTER

Canada's biggest supermarket chain says it wants to open more mid-sized conventional grocery stores in downtown Toronto to serve the booming condominium market.
But Loblaw Cos. Ltd. said it must first strike more deals with its unions, similar to the ones it got for its Ontario superstores, to remain competitive with non-union rivals.
The company, which reported another quarter of soft sales and earnings yesterday, also said its general-merchandise business continues to struggle.
First quarter profit fell 1.4 per cent to $140 million, or 51 cents a share, while sales inched up 1.4 per cent to $6.1 billion, the company said.
Loblaw chairman and major shareholder Galen Weston expressed faith in the company, which has been restructuring for four years.
"I'm confident in the strategy that has been embarked upon. Change of this magnitude is not easy and we have had our share of challenges," Weston told shareholders at Loblaw's annual general meeting.
During the period, the company brought its western Canadian "superstore'' concept to Ontario and moved its general-merchandise team from Calgary to Brampton. For the first time, it also outsourced a new warehouse to a third-party supplier.
The resulting disruption has at times left store shelves empty, which in turn hurt Loblaw profit and sales.
Loblaw said its food operations are now back to normal and the general merchandise business will be on track by the end of the second quarter.
"None of us takes pleasure in the impact these challenges have had on sales, earnings and share price performance," said Loblaw president John Lederer.
"We believe our performance will stabilize by the end of the second quarter ... and earnings will improve during the balance of the year," he added.
Loblaw's share price, already down 24.8 per cent this year, shed another 9 cents to close at $55.51 on the Toronto Stock Exchange yesterday.
The company said it plans to continue opening more superstores, which compete with Wal-Mart on price and selection. But Weston cautioned the era of the superstore may be coming to a close "at least in terms of the rapid growth we see right now." Loblaw operates 80 such stores, which carry both food and household goods, including clothing and furniture, mainly in suburban centres.
Those stores face increased competition as Wal-Mart adds the full assortment of fresh produce and meat to its Canadian stores later this year.
That challenge may be one reason why Loblaw is now looking at smaller, more convenient stores to serve busy urban consumers. Such stores would be roughly half the size of the superstores and carry mainly food.
Loblaw already has two locations picked out for downtown Toronto and would add more if they were successful, Weston said.
Sites include the former Maple Leaf Gardens arena on Carlton St. and another near Bathurst St. and Lakeshore Blvd. W.
Loblaw is also trying to reach busy urban shoppers by placing some of its President's Choice products in gas station convenience stores.
The company may also build some bigger No Frills discount stores in rural areas.
Sales at stores open more than a year declined 2.5 per cent, a trend that Lederer said reflected consumers' growing preference for shopping across several stores.
Loblaw may be cannibalizing same-store sales as it replaces older stores with larger superstores, said John Chamberlain, an analyst with Dominion Bond Rating Services Ltd.
Chamberlain said the warehouse restructuring was the right thing to do, given the Wal-Mart challenge.

[SSLL]

From: http://www.canada.com/nationalpost/finan...350f-927c-4f9f-9833-4baafde62ab4&k=67033
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Loblaw girds for battle
Facing Wal-Mart threat: Breakneck capital expansion chips at Q1 profit

Hollie Shaw
Financial Post
Friday, May 05, 2006

Loblaw president John Lederer vowed earnings will start to improve in the third quarter.
The "creative destruction and reinvention" of the old Loblaw Cos. was necessary for the survival of Canada's leading grocery chain in an era of exploding retail square footage, company president John Lederer said yesterday -- particularly from foreign, "non-union" competitors.

"We are changing the company from what it was to what it can be, and what it must be," Mr. Lederer told shareholders at the company's annual meeting in Toronto.

Mr. Lederer and company chairman Galen Weston defended the breakneck expansion of Loblaw's large general merchandise warehouses into eastern Canada, which comes as the non-unionized Wal-Mart Canada Corp. is set to open its first Canadian grocery superstores in Ontario later this year.

At the same time, some shareholders questioned whether the large-format Loblaw stores -- which incorporate food, an array of services, pharmacy, clothing, toys, electronics, housewares, and selected furniture and appliances -- were convenient enough for consumers in urban areas.

"I'm wondering if your whole concept of bigger and bigger is always better" mused one shareholder who said he frequents Dominion, competitor Metro Inc.'s smaller store, when he needs "to get in and out quickly."

Mr. Lederer said Loblaw is trying to appeal to all segments of the consumer market by offering its wares in multiple store formats: discount stores, conventional food-focused stores, larger food stores with some general merchandise and services and its superstores. "The consumer today is cross-shopping," he said. "They are always looking for value ... that then augers right for a multi-format business."

Loblaw has increased its net retail square footage by 5.4% in the last year, or 2.5 million square feet, opening 60 new stores and closing 46.

Mr. Lederer acknowledged there is room for Loblaw to open "smaller stores with great value" in urban markets such as Toronto, but would only do so if the cost structure made sense, and added Loblaw is working with its unions right now to see whether such stores are feasible.

Loblaw operates at a competitive disadvantage to Wal-Mart in terms of labour costs, as the majority of Loblaw stores are unionized. The retailer has successfully negotiated to pay employees at its 80 superstores lower wages than at its traditional stores.

The company is also running a test market with Imperial Oil Ltd., Mr. Lederer revealed, selling a selection of its popular President's Choice house brand at five of the company's gas bars.

The retailer's torrid capital expansion has come at a cost: Net earnings were down 23% in 2005, and Loblaw reported yesterday earnings sank another 1.4% in the first quarter to $140-million, or 51 cents a share, from $142-million (52 cents) in the same period a year earlier. Sales climbed 1.5% to $6.15-billion.

Sales at stores open for more than a year, an important industry metric known as same-store sales, fell 2.5%.

The earnings were in line with analyst expectations, but some analysts pointed to the same-store sales dip and questioned whether Loblaw's superstores were cannibalizing business at its conventional outlets.

Loblaw, which has slashed costs and reconfigured its supply chain to compete more effectively with Wal-Mart, has seen its sales and profits dip in the past year due to problems consolidating its warehousing operations, resulting in out-of-stock store shelves, particularly in health and beauty items.

Mr. Lederer vowed earnings will begin to improve in the third quarter.

But analysts say it could take a while before Loblaw's strategy begins to bear fruit.

"It will take at least another several quarters, possibly a year, before the company realizes any meaningful productivity improvements," Jim Durran, retail analyst at National Bank Financial, wrote in a recent note to clients.

[SSLL]

From: http://www.canada.com/nationalpost/financialpost/story.html?id=0922d022-482b-4412-ae1e-e500bf04754f
________________

U.S. bread chain eyes Canada

Peter Koven, Financial Post
Published: Saturday, May 06, 2006
The popular U.S. restaurant chain Panera Bread Co. has unveiled plans to enter the Canadian market in 2007, adding another competitor to an already crowded sector.
Panera is a quick-serve chain of so-called "bakery-cafes" based in Richmond Heights, Mo. For people sick of burgers and fries, the company offers premium sandwiches like asiago roast beef or portobello & mozzarella. It also offers a variety of soups, salads and sweets.
Panera is remaining close-mouthed about its Canadian expansion plans, only saying the first restaurant will be open next year. The company will not reveal what markets it plans to enter, or how many restaurants it eventually hopes to open.
"One of the things we've found in the last five to 10 years is this concept translates well regardless of geographic boundaries," said spokesman Mark Crowley. "This is something people are responding well to. It has led us to believe there could be an opportunity in an international market like Canada."
Panera owns and operates almost 900 stores in 36 U.S. states, more than 500 of which are franchised. It is planning to open another 150 to 160 this year. The stores tend to be located in suburban areas, but the company does have a growing urban presence as well.
But it's coming to a market that's already rife with competition. According to analyst Robert Silgardo at Dundee Securities Corp., the barriers to entry in Canada aren't especially strong, but being successful is another matter.
"Your average sandwich is already costing $8. To come in and charge $10, it would be hard to do, especially with gas costing $1 a litre," he said.
While Panera has positioned itself as a higher-end and healthier fast-food option, Mr. Silgardo said it's still going to face tough competition from the likes of McDonald's, Tim Hortons, Subway and Quizno's. Quizno's also marketed itself as a more premium brand when it entered Canada, but recently cut its prices.
"They're all trying to compete for that lunch dollar. McDonald's has their special deals, Wendy's has salads. If they're trying to be more premium than Quizno's, it would be tough. It depends how good they are at marketing," he said.
Location could be a problem as well. According to Mr. Silgardo, it is becoming increasingly hard to find good locations in Ontario. He said Panera might have an easier time in Alberta, where there is no provincial sales tax and more wealth.

[SteelTown]

$100 million to be injected into Centre Mall redevelopment

TORONTO (May 9, 2006): The CPP Investment Board and Osmington Inc. today announced it will invest $100 million in the redevelopment of Centre Mall in Hamilton, Ontario. Co-owner and operating partner Osmington Inc. will be leading the redevelopment plans for the shopping centre. Construction will begin in this fall and will be completed in phases by fall 2008.

Centre Mall is one of five shopping centres purchased jointly by the CPP Investment Board and Osmington Inc. in 2003 and was among the first real estate investments made by the CPP Investment Board.

It first opened in 1955 as an open-air mall. Centre Mall contains 750,000 square feet and is located at Barton Street and Kenilworth Avenue, near the city's downtown and serves a large regional area. The redevelopment plans call for the conversion of the mall into an 800,000 sq.ft. power centre format. Details on the redevelopment will be finalized in the summer of 2006, with major tenant announcements to follow.

According to Osmington Inc., the major redevelopment of this long-standing property in such a key location in downtown Hamilton will return the property to prominence as one of Hamilton's premier shopping destinations.

"Real estate offers attractive risk-adjusted returns that are a good match for the inflation-indexed benefits provided by the CPP," said Graeme Eadie, Vice-President Real Estate Investments, CPP Investment Board. "Shopping centres are a favourable investment as they help balance our Canadian real estate portfolio."

Together, CPP Investment Board and Osmington Inc. own 9 shopping centres across Canada.

The CPP fund's $4 billion real estate portfolio contains mostly office and retail commercial properties located in major centres across Canada including Vancouver, Calgary, Edmonton, London, Hamilton, Toronto, Ottawa, Montreal, Sherbrooke and Quebec City.

As at December 31, 2005, the CPP fund held $92.5 billion in assets including government bonds, publicly traded stocks, private equities, inflation-linked bonds, infrastructure and real estate.

According to the Chief Actuary of Canada, the CPP fund is expected to grow to $246 billion within the next decade and will be among the world's largest institutional investors.

[SSLL]

From: http://www.theglobeandmail.com/servlet/story/RTGAM.20060511.whbcc0511/BNStory/Business/home
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Zucker's vision for HBC: Think Macy's
MARINA STRAUSS
From Friday's Globe and Mail
Jerry Zucker offered suppliers his vision of Hudson's Bay Co. this week — and a lot of it looks like Macy's.

The new U.S. owner wants to make the Bay a more distinctive department store retailer, even replacing plastic shopping bags with paper bags and tissue paper. He wants to stock the stores with brands that aren't available at HBC's Zellers or Home Outfitters — or anywhere else — and he's already adding more staff on the sales floor.

He envisages a chain that emulates the venerable Macy's in the U.S., a destination for exclusive products and attentive service.

In addition, he is stocking HBC stores with merchandise geared to neighbouring ethnic communities.

These are some of the points that surfaced at an invitation-only, $250-a-head meeting for HBC suppliers Mr. Zucker and his executives hosted at the Mississauga Convention Centre on Wednesday, according to some vendors who attended.

They described the low-profile U.S. businessman as charming and engaging. He started the session by insisting that the information remain confidential, reminding the 1,500 or so attendees that he is a very private person and his company is no longer public. He asked anyone with a tape recorder to turn it off, and “stopped once to make sure no one was recording,” one source said.

“He came across as very sincere,” said another source — who, like others, asked not to be named. “He knows how to talk to people.... He's very approachable.”

Another source added: “He seemed upbeat.”

In addresses by Mr. Zucker and his team, the suppliers found out that he considers ethnic communities a growth opportunity for HBC and wants to stock each store with goods that cater to the local residents.

He himself immigrated to the United States from Israel, and understands newcomers' difficulties in trying to shop in unfamiliar territory.

An HBC store in Brampton is already stocking more food and other merchandise that will appeal to residents in the surrounding neighbourhood, which includes many people from India and Pakistan.

At another store, a sales woman at the fragrance counter is making a point of speaking Chinese to customers of that background — producing some record sales, the meeting was told.

Mr. Zucker has other items on his to-do list. He plans to transform HBC's Western Canadian discounter, Fields, into a national dollar-store-like chain, while expanding Home Outfitters and the fledgling Designer Depot.

He wants HBC suppliers to take more responsibility, and more risk, for how their products fare in the stores and plans to hook them up to computer systems to feed them detailed data on their sales at each outlet. Taking a page from the books of many large U.S. retailers, he expects suppliers to manage their inventory, taking back unsold merchandise after a certain period, and replenishing shelves when needed.

Store managers should also have more power to order products as they see fit.

Mr. Zucker believes spending on television and newspaper ads should be reduced in favour of direct marketing, taking advantage of the rich database of customer information gleaned by the company's loyalty program.

He even suggested that HBC charge higher prices on goods in remote areas to make up for high costs of shipping the goods there, one supplier said.

He also provided reassuring news for anxious suppliers about getting credit coverage for goods they ship to HBC, telling them to contact two of the banks that helped finance his $1.1-billion acquisition of HBC earlier this year. They have divisions that provide credit coverage for suppliers.

Several suppliers complained that Mr. Zucker had charged $250 a person for up to four people from each company to attend the conference. In addition, he charged $50 for a store tour and $75 for any other company members to show up at the reception following the meeting. It lasted about 2½ hours, with a band, open bar and hors d'oeuvres afterward, attendees said.

“How can they have the gall to have a vendors' conference and charge the vendors for attending?” one supplier asked rhetorically before the meeting. “This at a time when vendors are nervous and looking for reassurance.”

[Kilgore Trout]

He wants to stock the stores with brands that aren't available at HBC's Zellers or Home Outfitters — or anywhere else — and he's already adding more staff on the sales floor.

He envisages a chain that emulates the venerable Macy's in the U.S., a destination for exclusive products and attentive service.

In addition, he is stocking HBC stores with merchandise geared to neighbouring ethnic communities.

you mean he wants to actually make the bay a place where more than just blue-haired old ladies shop? how awful! this is yet another sign of the american imperial takeover of canada's cultural heritage of bad service and limited choice!

[miketoronto]

Interesting what he wants to do. I don't agree with one thing though.

At another store, a sales woman at the fragrance counter is making a point of speaking Chinese to customers of that background — producing some record sales, the meeting was told.

This is Canada and the people should be talking in English at the store, not some other language.

But other then that it seems like he has some good ideas.

[Kilgore Trout]

it's a business, mike. if a customer prefers to be served in his/her own language and a store is willing to provide that service, what's the problem? it's not like they're going to force you to speak chinese when you shop at the bay.

[miketoronto]

A co-worker brought this very fact up actually at work today, about how Canada does not push people to learn our customs. This is Canada, and you speak English when you are in a store. Its simple. I really don't think stores in Canada should be making it more easy for people not to learn the language of this country.