Most of the remaining 64 Zellers stores not being converted to Target or Wal-Mart stores will disappear from the Canadian retail landscape by the end of next March. Parent Hudson's Bay Company quietly informed its employees yesterday. Estimates of the number of employees affected hover around 6,400, plus Zeddy the Zellers' teddy bear mascot.
Last year, Target Corporation acquired the leaseholds for 189 Zellers stores, and will be opening between 125 and 135 Target stores in them starting next year. The deal cost Target $1.825 billion, about the same price which NRDC Equity Partners, the New York-based owners of the Lord & Taylor department store chain in the USA, paid for the entire HBC empire in 2008. Target then heaved off 39 locations to Wal-Mart Canada which will open stores in them.
Of the 64 Zellers stores that could be affected by this closure, the bulk of them are in Ontario and Quebec. The former has 29 locations, and the latter 15.
New Brunswick and Nova Scotia have four each stores which could close, and there are three each in BC, Alberta, and Saskatchewan. Two Zellers stores remain in Winnipeg, and one in Summerside, PEI.
Although the parent company initially stated that some of these stores could remain open under the Zellers banner, it confirmed to the CBC that most would close and if any stores were to remain open, they would be under a different banner. Judging by the company's concern with both location and geographic footprint, it is difficult to envision an efficient supply chain to stock such widely scattered stores in secondary and tertiary markets. Marketing would be similarly inefficient.
Zellers had been part of the Hudson's Bay Company empire since 1978, when Joel Segal, president of Zellers, offered to buy HBC. Instead, HBC liked the idea of having its own nationwide chain of discount department stores, and bought Zellers. The situation was similar to one two years earlier, when Zellers was faced with a takeover by Fields clothing stores in BC, and instead bought Fields, adding 70 stores to the 155 already under the Zellers banner.
By purchasing Zellers, HBC had also acquired 162 franchised Marshall Wells hardware stores. Deeming them not relevant to its core department store business under The Bay, Zellers, and Fields banners, HBC sold off Marshall Wells in 1985 for $20 million.
Walter P. Zeller founded Zellers as "stores for thrifty Canadians" in 1931, at the height of the great depression, by buying 14 southern Ontario locations of U.S. retailer Schulte-United. It expanded rapidly. In 1952 it expanded into Atlantic Canada by adding a dozen new stores by purchasing Federal Stores. As of the mid-1950s over 3,000 people worked for one of Zellers' 60 stores.
Zellers had growth spurts in the 1990s as well. In 1990, most of the 51 store locations HBC acquired from Towers/Bonimart became Zellers stores. Three years later, HBC purchased assets of bankrupt Woodward's department stores in western Canada, converting 21 locations into Zellers or The Bay stores, raising profile of both banners in the west. When Kmart exited Canada in 1998, HBC took over Kmart's Canadian infrastructure and merged it with Zellers. Zellers moved its headquarters to Kmart's former offices in Brampton, ON, and many of the Kmarts were converted to Zellers.
An average Zellers store was said to be 94,000 square feet, much smaller than the footprint preferred by Target or Wal-Mart. Both those companies have said they will put millions of dollars of renovations into Zellers store locations whose leaseholds they have acquired from HBC.
In the 1990s Zellers introduced an advertising price line which became a catchphrase nationwide: "The lowest price is the law." In the 1980s, Zellers' loyalty program was affectionately parodied by an acquaintance who recorded his answering machine message by mimicking the smarmy voice of Lifestyles of the Rich & Famous TV host Robin Leach, and describing himself as a "reputed to be a member of the exclusive Club Z."