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Nordstrom Exits Canada—Minor Impact to Real Estate Entities

On March 3, 2023, Nordstrom Inc. (Nordstrom; rated BB with a Stable trend by DBRS Morningstar) announced it will exit the Canadian market by filing under the Companies' Creditors Arrangement Act, effectively closing and vacating six Nordstrom and seven Nordstrom Rack branded stores. Nordstrom’s decision to exit the Canadian market comes at a time when discretionary spending across low- and medium-income tiers is under pressure, thus raising questions of oversaturation of discretionary brick-and-mortar retailers. Nordstrom's announcement follows Bed Bath & Beyond's February 2023 decision to also shutter its entire Canadian footprint, which could indicate a new trend for discretionary retailers looking to preserve margins in an inflationary environment. While the Nordstrom departure will result in a loss of anchor tenants in their respective shopping centres, the overall exposure to their respective DBRS Morningstar-rated real estate owners is minimal. Nevertheless, DBRS Morningstar believes that the loss of an established, reputable anchor tenant could lead to a decrease in consumer footfalls and, thus, have an implicit effect on remaining tenants. While the direct effects of the Nordstrom closures can be reasonably estimated, the indirect effect could take several months to materialize and can be difficult to measure.