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TORONTO (Reuters) - U.S. luxury retailer Nordstrom Inc sees potential to open more than a dozen of its lower-priced Rack shops in Canada, and will start rolling them out after it opens the first of its namesake department stores in the country in the fall of 2014.
Formally announcing the opening of four full-sized Nordstrom stores in Canada on Thursday, the Seattle-based company's president, Blake Nordstrom, said the northern expansion was "the worst-kept secret".
Years in the making, Nordstrom's first international venture came up against a tight commercial real estate market in Canada.
"There are few retail centers that warrant the kind of investment and the kind of store we have, and so there isn't a plethora of choices," he said in an interview.
The company is one of a long list of U.S. retailers expanding into Canada, lured by a relatively resilient economy and customers who are often already familiar with U.S. brands. U.S. discount chain Target Corp is set to open 125 Canadian stores starting next spring, a move that is expected to shake up the market.
Nordstrom will open in Calgary's Chinook Centre in the fall of 2014, Ottawa's Rideau Centre and Vancouver's Pacific Centre in the spring of 2015, and Toronto's Sherway Gardens in the fall of 2016.
All four malls are operated by commercial real estate heavyweight Cadillac Fairview, which is owned by the Ontario Teachers' Pension Plan.
In Canada, Nordstrom will come up against closely held luxury department store chain Holt Renfrew.
The move also comes as Hudson's Bay Co pushes to move its Canadian business upscale and eyes an initial public offering.
The company's flagship chain, The Bay, has been swapping out brands, pushing to improve customer service and hosting high-profile celebrity fashion events at remodeled downtown stores.
HBC will feel pressure from Target at the low end, and at some locations, from Nordstrom at the high end, said Alex Arifuzzaman, partner at InterStratics Consultants Inc.
"They're going to have to address that through marketing, through product, through pricing, and it's going to be a challenge, but it's not an insurmountable challenge," he said.
Blake Nordstrom said he is confident about finding space for his company's smaller Rack outlets in the Canadian market.
"I think in an ideal world we'd get a full-line store open, our first is Calgary, and then shortly thereafter start looking at Racks," he said.
He sees the potential for up to nine full Nordstrom stores and 12 to 15 Racks in Canada.
In August, Nordstrom boosted its profit and sales forecasts for the year, helped by sales at the Rack chain, which it plans to expand dramatically in the next four years. It said it was aiming for 230 Rack stores by the end of 2016, up from 110.
The company also plans to have offer a credit card in Canada, but the president said it is too early for specifics.
Despite a sluggish economy, U.S. luxury chains such as Nordstrom, Neiman Marcus Group and Saks Inc have outperformed those that cater to middle- and lower-income shoppers, as affluent consumers keep spending.
Still, all three companies have been cautious, generally choosing to ramp up outlet chains rather than expand their full-service stores.
In three Canadian cities, Nordstrom will take over stores that Sears Canada is set to close this fall. In Toronto, it will locate in an expansion of Sherway Gardens.
Nordstrom named Karen McKibbin president of Nordstrom Canada. McKibbin, who has been with Nordstrom for 27 years, was most recently vice president and regional manager for northern California and Hawaii. She will hire about 1,000 local employees.
Founded in 1901, Nordstrom operates 117 full-line stores and 113 Rack stores in the United States.
Additional reporting by Maneesha Tiwari in Bangalore; Editing by Don Sebastian,; Frank McGurty and; Peter Galloway