A Sector in Transition: Bankruptcy and Market Pressures
The Canadian retail sector is navigating a turbulent period marked by high-profile bankruptcies, store closures, restructuring efforts, and an evolving consumer landscape. The recent creditor protection filing of Hudson’s Bay Company (HBC) — a historic Canadian institution — and the acquisition of its brand assets by Canadian Tire Corp. for $30 million is a stark reminder of the industry’s fragility.
Retail analyst Bruce Winder of Toronto describes this phenomenon as part of the “natural circle of life” in retail. “It cleanses itself, it has a purge. Now and then, the retail industry keeps itself healthy by shedding the weak and making way for the strong,” Winder said in an interview with Canadian Press (CP).
However, current conditions are particularly difficult, compounded by global trade tensions, rising job insecurity, and elevated consumer debt.
Retail consultant Doug Stephens noted in a recent interview with Retail Insider that “at any given time, at least 50 percent of Canadian retailers operate on razor-thin margins.” The financial strain leaves many vulnerable to sudden downturns.
Recent data underscores this precariousness: consumer debt in Canada reached a record $2.5 trillion in 2024, fueled by escalating mortgage and non-mortgage borrowing, according to TransUnion Canada. Meanwhile, unemployment climbed to 7 per cent in May 2025 — the highest since 2016, excluding pandemic years — and consumer spending growth slowed sharply to 1.5 percent in Q2 2025 from 5.4 per cent in the previous quarter, as reported by Toronto-Dominion Bank.
E-commerce and Competition Reshape Retail Dynamics
Retail’s vulnerability varies by sector. Essential goods retailers like Loblaw Companies Ltd. continue to perform robustly, benefiting from steady demand. Conversely, the apparel segment faces volatility, challenged by fast-changing trends and high rates of online returns. “For commodity items, consumers seek the lowest price, but for higher-value purchases, they expect exceptional quality or brand prestige,” Winder explained to Canadian Press.
This divide extends to retail real estate, where malls are polarizing into either premium destinations, like Toronto’s Yorkdale, or value-focused centres anchored by discount retailers — with many others facing conversion to residential developments.
E-commerce growth, accelerated by the pandemic, has reshaped consumer expectations. Amazon, alongside marketplaces like Shein and Temu, has intensified pressure on brick-and-mortar retailers. “The ever-growing presence of Amazon and other online platforms spells tough days for physical stores,” Stephens told Retail Insider.
Canadian retailers also contend with the impact of large U.S. competitors wielding scale advantages. Costco, for instance, operates on slim margins of 8 to 12 percent but drives profitability through memberships, a model difficult for smaller retailers to match. This dynamic contributed to the struggles of mid-tier players like Hakim Optical Lab Ltd., which faced stiff competition from global brands including Specsavers, Warby Parker, and Walmart, Winder said in the Canadian Press.
The Future of Canadian Retail: Adaptation and Resilience
Retail insolvencies are on the rise. Data from the Office of the Superintendent of Bankruptcy shows a 29 percent month-over-month increase and a 73 percent year-over-year surge in retail bankruptcies and proposals as of March 2025. Although below the levels seen during the 2008–2010 financial crisis, insolvency rates remain elevated.
Underlying causes for retailer insolvency often revolve around unsustainable debt levels. HBC’s nearly $1 billion debt load was a primary factor in its creditor protection filing. Slowing consumer spending, heightened by economic uncertainty and tariffs on imports, has squeezed revenues. Fixed costs like long-term leases add additional burdens, particularly as many landlords remain reluctant to reduce rates despite the changing retail landscape.
Retailers also face strategic paralysis. Many hesitate to evolve or reposition due to fears of alienating their current customer base, even as the consumer demographic shifts. Historical disruptions driven by technology are not new: HMV Canada’s decline after music consumption shifted from CDs to digital formats is a classic example, Winder said. The rise of the resale market, encompassing secondhand stores and platforms like Poshmark, is another disruptive force, with e-commerce growing 13.2 percent annually and projected to reach US$4.72 billion in 2025, according to Research and Markets.
Looking ahead, the Retail Council of Canada forecasts continued flat sales, with clothing, jewellery, and footwear sectors particularly at risk. Success increasingly depends on embracing omnichannel retail strategies, blending online and physical presence to meet consumer expectations, said Santo Ligotti, vice-president of membership and marketing at the Retail Council of Canada.
Winder predicts continued growth in value retailers such as No Frills alongside expansion in luxury goods. “Retail in Canada is reflecting the broader societal divide — a two-tier system between affluent and budget-conscious consumers,” he told the Canadian Press. The influx of international retailers from Asia, Europe, and the U.S. will likely intensify competition, but a “Buy Canadian” movement may provide an advantage to domestic retailers, albeit temporarily.
Stephens foresees further consolidation, with dominant players like Costco and Home Depot expanding, while many mid-tier retailers shrink or disappear. He stresses the importance of Canadian retail independence. “We must be prepared to serve ourselves if major international retailers were to exit the market,” he said in Retail Insider.
