Zellers

## History

On Saturday August 4, 1928 Zellers Ltd was born in London, Ontario. Walter P. Zeller, its founder, opened his new store & head office at 176 Dundas Street after working for years for Metropolitan Stores, F.W. Woolworth Company and Kresge's. This new store was to be a part of a chain of Canadian department stores. The plan at the start was to have stores opened in London, St. Catharines, Niagara Falls, Fort William and Saint John, New Brunswick. The London store had a street frontage of 53 feet and a depth of 137 feet. It had a total of 7,000 square feet of space on the ground floor with 2,000 square feet of counter space spread out around the store. Sixty women were hired for the opening day working in 21 different departments. Within months Zellers was doing such good business that they were bought out by the American firm Schulte-United Ltd. Within two years the rebranded stores went bankrupt. Walter Zeller promptly bought most of the failed Schulte stores and relaunched Zellers in late 1931. Zellers Department Store remained at 176 Dundas Street until the late 1980s.

## 1930s–1960s: Early years, partnership with W.T. Grant

The company was founded in 1931 by Walter P. Zeller as stores for thrifty Canadians. The chain began with the purchase of the fourteen Canadian locations of American retailer Schulte-United, all of which were in Southern Ontario. Almost immediately, Zellers initiated an aggressive expansion strategy. Within 25 years, Zellers operated 60 stores and employed 3,000 people. In 1952, in a move to expand into Atlantic Canada, it acquired the Federal Stores chain of variety stores, adding more than 12 new Zellers locations.

During this period of expansion, Zellers concluded a deal with W.T. Grant, a similar chain of American mass merchandise department stores. This arrangement allowed W.T. Grant to purchase 10% of Zellers shares and eventually a 51% ownership in 1959. In exchange, the Grant Company made available to Zellers its experience in merchandising, real estate, store development, and general administration. Zellers employees were sent to Grant stores and head office for training and the two companies made common buying trips to east Asia. In the 1950s, the chain again began opening new locations and in 1956, opened its first self-serve location at the Norgate shopping centre in Saint-Laurent, Quebec. Stores opened in 1960 employed many new innovations, including the first in store restaurant, the first automotive centre and the first suburban location

### 1970s–1980s: Acquisitions of Field and by HBCEdit

Until 1973, the retailer was known as Zeller's (or Zeller in Quebec). That year, the company dropped the apostrophe from its name to become Zellers. In 1975, Zellers changed logo to the one it would keep for its remaining 45 years. By 1976, Zellers had grown to a chain of 155 stores, with annual sales of $407 million.

Although Zellers was prospering, W.T. Grant was facing intense competition in the United States, and was forced to withdraw entirely from its Canadian operations. In 1976, Fields, a clothing retailer based in Vancouver, British Columbia, offered to purchase a 50.1% stake in Zellers for $32,675,000. Zellers' shareholders, unhappy with the idea of Zellers becoming a subsidiary of Fields, reversed the takeover and purchased Fields and its hardware store division, Marshall Wells. This sale added 70 Fields stores and 162 franchised Marshall Wells stores to the company. Fields president and founder, Joseph Segal was appointed as president of Zellers.

In June 1978, Zellers presented a bid to acquire 100% ownership of the Hudson's Bay Company (HBC). HBC management, recognizing Zellers profitability and the potential to enter a new retail segment, decided to purchase Zellers instead. Zellers and Fields, operating in very different retail segments from HBC, were kept intact and established as separate divisions of the company. HBC acquired full ownership of Zellers and Fields in 1981 and Marshall Wells in 1982. By 1985, HBC had sold Marshall Wells for $20 million, because it was not relevant to its department store business.

Counterfeit video games for the Atari 2600 were manufactured in Taiwan and sold by Zellers in the 1980s, usually under new names and artwork and occasionally with modified graphics. All games were pirated copies of titles created either by Atari itself or by third-party developers, such as Activision. Zellers was eventually forced by Atari to stop selling these games. Zellers released 18 games for the Atari 2600 in the early 1980s.

### 1990s: Further acquisitionsEdit

In 1990, Hudson's Bay Company acquired the 51 stores of the Towers/Bonimart chain from the Oshawa Group, and converted most of them to Zellers outlets, including its flagship location in Toronto. Zellers advertisements at the time featured both the Towers mascot, Sparky, and the Zellers mascot, Zeddy, walking arm in arm. During this period, Zellers used the slogan "the lowest price is the law."

In 1993, Hudson's Bay Company purchased the assets of the bankrupt Woodward's chain, including 21 store locations. These were converted into Zellers and The Bay stores, and greatly expanded the company's presence in Western Canada. In 1998, Hudson's Bay Company acquired Kmart's Canadian division, and merged it with the Zellers division to create a larger combined chain under the Zellers name. While some Kmart locations were closed, many sites became full Zellers outlets.

In 1996, Hudson's Bay Company closed its Zellers head office in Montreal, Quebec and merged it with the Hudson's Bay Company headquarters in downtown Toronto. By 1998, Hudson's Bay Company regained a Zellers head office after Zellers took over Kmart's Canadian head office in Brampton, Ontario.

### 2000s: DeclineEdit

On February 28, 2006, Hudson's Bay Company was taken private by South Carolina businessman Jerry Zucker. In Hudson's Bay Company's last year as a publicly traded company, Zellers had 291 stores and lost $107 million on sales of $4.2 billion.

Mark Foote, who had headed general merchandise at Loblaw Companies and was president of Canadian Tire Corp's retail division, was appointed President and CEO of Zellers in 2008 and he was credited with stabilizing the chain, though it still struggled against Walmart Canada.

Following Zucker's death in 2008, Hudson's Bay Company and its subsidiaries including Zellers came under the ownership of a New York based company, NRDC Equity Partners, which was headed by Richard Baker. NRDC owns the Lord & Taylor upscale specialty retail department store chain in the United States. Subsequently, NRDC invested heavily in The Bay and managed a turnaround by repositioning it as an upscale, fashion forward retailer. However the Zellers chain was still struggling and was seen as a drag on the parent company and its American owner.

### 2011–2013: Lease acquisitions by Target, liquidation and closures

On January 13, 2011, it was announced that US. retail chain Target Corporation would purchase the lease agreements of up to 220 Zellers stores for $1.825 billion. Under the agreement, Zellers would sublease the properties and continue to operate them as Zellers locations until January 2012 at the earliest, and at the latest the end of March 2013. At the time of this announcement, Zellers operated 273 stores, well below the 350 stores it had in 1999.

Upon the announcement, it was reported that once the Zellers stores at these locations were closed, Target would renovate 100 to 150 of them to reopen the stores under the Target banner during 2013 and 2014. The remaining acquired sites would be transferred to other retailers. HBC had said that it would continue to operate the remaining Zellers stores as a smaller chain in specific communities.

Of the maximum 220 locations, 105 to be transferred to Target were identified in late May 2011, and another lot of 84 locations in late September 2011, bringing the total number of Zellers stores acquired by Target to 189. Of these 189 stores, 125–135 stores would be converted into Target stores,[*citation needed*] 39 others were resold to Walmart Canada, and the remaining 15–25 leases were either sold to other retailers or returned to the landlords who own the sites.[*citation needed*]

RioCan REIT was significantly affected, as many of its mall properties include Zellers locations. In addition, the United Food and Commercial Workers Union planned to hold demonstrations as many Zellers staffers were to be laid off instead of being retained by Target or Walmart. This was in marked contrast to the takeover of Woolco by Walmart in 1994, where all Woolco employees of the acquired stores were retained.

The President and CEO of Zellers, Mark Foote, had a mandate to liquidate the 273 Zellers stores in preparing it for Target's takeover by October 2011. Foote's strategy was to use a blueprint of a retail liquidation, but without the typical insolvency and desperation that plagued failing chains. Foote focused on raising profits, even if that meant losing market share and reducing store traffic, by ramping up inventory levels of higher margin goods over loss leaders such as apparel over deeply discounted paper towels and detergent, and slashing costs. Foote also replaced the expensive fall television ad campaign with a social media blitz on Facebook. Reportedly, the strategy was paying off as Zellers operating profit was "well ahead of expectations and the retailer had performed very well in 2011.

In March 2012, the first 50 Zellers stores were put in liquidation. This included all 39 Zellers stores slated to become Walmart outlets. By mid-June, the latter locations were closed to the public. On June 25, 2012, 17 more stores in Ontario were put in liquidation.

The Hudson's Bay Company announced on July 26, 2012, that it would close most of the 64 remaining stores that were supposed to continue operating as Zellers outlets. A company spokesperson stated that these stores employ 6,400 people, or approximately 100 per location, range in size from 48,000 to 128,000 square feet and are mostly in small towns. The closings of these stores were to happen at the latest on March 31, 2013 which coincided with the deadline date the HBC had to vacate the sites acquired by Target. The HBC's main reason for closing the 64 remaining stores was due to Zellers lack of profitability. The HBC also remarked that it would not be viable to keep Zellers as an ongoing chain due to the geographical locations of the remaining 64 stores. The HBC did not exclude the possibility of keeping some stores open and converting them as The Bay or Home Outfitters outlets. But then on August 17, 2022, It was announced that Zellers is making a comeback to stores in 2023.

After the deal with Target Corporation, HBC still a burden in half of the $226.4-million of Zellers lease obligations remaining through 2016, with the rent for 2012 alone being almost half of HBC's adjusted profit. With HBC preparing an initial public offering in late 2012, it either had terminated these liabilities with landlords at steep discounts or find new tenants to sublet the space.

The final closing Zellers stores started their liquidation sale on December 26, 2012 and the company stopped accepting returns on January 31, 2013. Liquidators sold nearly all of Zellers merchandise, store fixtures and shopping carts at discounted prices.