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Many attribute Eaton's downfall to failure to keep up with market

By Jon Springer

The records will show that it was money that eventually brought down Eaton's. But many experts feel time caught up with it as well.

"We continue to encounter shoppers who say they will miss Eaton's, but it doesn't seem they had been shopping there," said Richard Armour, Western Division vice president for 20 Vic Management, a Toronto-based company that manages six malls affected by the August bankruptcy filing and subsequent liquidation of Canadian retail icon T. Eaton & Co.

"The 18- to 30-year-olds probably won't miss Eaton's," Armour added. "I think it's time to look to the future rather than the past."

In September, Eaton's, the 130-year-old department store giant that once ruled a nation, was on its last legs. Shoppers in flagship stores in Montréal and Toronto rifled through thinning racks of merchandise, discounted up to 50% by liquidators. The once handsome entrances and store interiors were plastered with gaudy red and blue signs advertising closing sales.

While mall owners and managers at ICSC's Canadian Conference, held in Toronto in September, anxiously awaited word as to whether their Eaton's leases would be sold to new operators, some reflected on just what went wrong with their anchor. The majority said that company management — namely, the fourth generation of the family business — simply failed to keep up with changes in the marketplace. And even when it appeared Eaton's strategies were on target, there was no money available to implement them.

René Tremblay, president of Montréal-based mall owner Ivanhoe, called Eaton's demise "a big loss for the retail industry in Canada." He felt that Eaton's became "too similar" to competitors Hudson's Bay and Sears Canada, partly as a result of an overreaction to the country's last big recession in the late 1980s. By reaching toward more middle-market customers with an "everyday value pricing," strategy, Tremblay said, Eaton's lost many of its traditional upscale customers.

David Brodie, a merchandising analyst for investment bank CIBC World Markets in Toronto, suggested that the addition of Wal-Mart to the Canadian retail scene in the 1990s in fact accelerated the decline — not only of Eaton's, but of its competitors as well. The Bentonville, Ark.-based mass merchant has had an enormous impact, Brodie said, noting that it would control around 38% of the full-line and discount anchor market in 2000 — up from nothing in around 10 years.

Obviously, the retail environment in the late 20th century is quite different than the one Timothy Eaton discovered in the mid 19th. The immigrant from Ireland opened his first store then on Toronto's Yonge Street in 1869, and introduced a catalog soon to be known as the "Retail Bible" of Canada, as well as a then unheard of money-back guarantee if goods were not satisfactory.

The business thrived through two additional generations of his family but appeared to head suddenly downhill when passed to a fourth generation — four brothers who were said to have less interest in running stores than living extravagant lifestyles. The most recent Eaton to run the business, George Ross Eaton, was a former hippie and race-car driver criticized for putting in place such disastrous policies as "everyday value pricing" that led to the company's filing for protection under Canada's Bankruptcy and Insolvency Act in 1997, reports said.

Subsequent investigations, including a recent book by journalist Rod McQueen, tell a tale of pampering executives throughout the regime.

Following its emergence from bankruptcy protection in 1998, experienced turnaround executive Brent Ballantyne was named chairman and the chain went public for the first time. But despite efforts to recapture its ground as a high-fashion merchant, Eaton's never reversed course and bled millions. Its stock, which sold at C$15 a share in its June 1998 IPO, halted trading on the Toronto exchange this spring at 70 cents.

For months, rumors were rampant about a possible sale of the chain, but they died in August, just days before Eaton's filed for bankruptcy for the second — and last — time.

"There is no room for people who are inept or poorly managed," Brodie said. "Eaton's tried desperately, but they could not stay with the times."