Saks Fifth Avenue stores coming to downtown Toronto, Sherway Gardens

A shopper leaves the Hudson Bay Company store on Thursday, Jan. 26, 2006 in Toronto, Ont. (Nathan Denette / THE CANADIAN PRESS)

TORONTO -- One of Canada's most prominent shopping malls will become a testing ground for luxury retailers after Hudson's Bay announced plans Monday to open a Saks Fifth Avenue department store across from the Toronto Eaton Centre.

Saks will be just steps away from Nordstrom, another newcomer taking over part of the soon-to-be vacated Sears store.

The two retailers join the growing list of notable U.S. retailers that have opened stores in Canada.

The changes at the Eaton Centre are symbolic of a broader evolution at one of the most popular shopping malls across the country -- one that has long been the home of department stores with little flash.

The move by Cadillac Fairview, owner of the Eaton Centre, to host the two high-end retailers prevents the popular tourist mall from becoming weighed down by stagnant brands.

"This takes a great shopping centre with two mediocre anchors, and makes it one with two great anchors," said retail consultant John Williams of the J.C. Williams Group.

"It gives the upscale market retail game a bit of a tilt."

After years of hype over the entry into Canada of Target and a number of smaller fashion retailers, Canada's shopping malls are in the midst of their own evolution as owners work to keep consumers walking the hallways rather than going for deep discounts at superstores and outlets.

Both Saks and Nordstrom are chasing similar demographics, an upper middle-class shopper who values both style and quality in fashion.

Nordstrom chases a more suburbanite market, with clothing that caters to teens and parents, said Brynn Winegard, a marketing analyst at Winegard and Company.

"It runs the gamut a little bit more, while Saks is more upscale," she said.

At the Eaton Centre, Cadillac Fairview has been aggressive in trying to attract the best retailers to the popular tourist mall -- but never before has it lured away a major retailer like Saks from another mall operator after plans already seemed set in stone.

Last November, Hudson's Bay announced plans to usher Saks into Canada by replacing The Bay at Yonge and Bloor streets in Toronto, just blocks from the chic Yorkville district.

When Cadillac Fairview caught wind of the announcement, its executives quickly swooped in and convinced HBC chief executive officer Richard Baker to abandon his plan.

Under the new deal, Hudson's Bay Co. (TSX:HBC) said that Saks will share space with HBC's flagship store in downtown Toronto, while the second store will be at the Sherway Gardens mall, in the city's west end.

As part of the deal, HBC will sell and lease back its main downtown Toronto store and executive offices to Cadillac Fairview for $650 million. HBC will lease the properties for 25 years with options to extend the leases nearly 50 additional years.

The company says it will use the cash from the sales to pay down debt and fund growth.

The Saks location will move into part of the current Hudson's Bay store on Queen St., taking up about 150,000 square feet of the 750,000-square-foot space. The store is scheduled to open in late 2015, which is nearly a year before the Nordstrom store.

"We think this is an incredible opportunity for us and for downtown Toronto," Baker said in an email.

"We believe strongly in the future of the downtown core as a retail destination."

It's a rarity for such a dramatic change, but the move by Cadillac Fairview serves as a sign of how competitive mall operators have become in chasing the biggest names in the retail industry.

"This is a strategic play by Cadillac Fairview to try and command luxury brands," said Winegard.

"Whether or not that works in the organization's favour, only time will tell. (But) this is going to benefit Cadillac Fairview and Eaton Centre more than it's going to benefit Saks."