Even a decade ago, the demise of T. Eaton Co. Ltd. would have been unthinkable for Canada, nothing short of a national calamity.
Since its founding here in 1869, the venerable department store had helped stitch together an expansive country, defined its middle-class tastes and set the pattern for its cozy business culture. At one time, it was, after the railroads and the phone company, Canada's fourth-largest private employer and accounted for 58 percent of the country's department-store sales. With their mansions and yachts and British titles, its owners were the closest thing Canada had to home-grown royalty.
But last weekend, as Eaton's announced it was headed toward liquidation, there was little surprise or even remorse. Canadian consumers had long since found better prices, service and selection at the more down-to-earth Hudson's Bay Co. or at Sears or Wal-Mart.
In addition, a recent spate of books and court filings revealed how recent generations of Eaton's merchant princes had become so arrogant, spendthrift and inattentive to their legacy that a once-thriving business--along with the family fortune--was frittered away.
"Give them a boat or a plane, enough gas for the day, some champagne and caviar for a picnic lunch, and the Eaton boys are happy," wrote Rod McQueen in his unflattering portrait of the current generation of Eaton brothers--George, Fredrik, Thor and John. "There wasn't enough royal jelly among them to spread on a piece of toast."
Peter Newman, the prolific chronicler of the Canadian business establishment, declared the death of Eaton's nothing less than a corporate suicide brought on by a generation that was more interested in racing cars, buying hockey teams, serving in diplomatic posts and hunting big game in Africa than it was in minding the store.
The public's first hint that there might be trouble at the very private company came only two years ago, when wary bankers forced Eaton's to seek court protection while it reorganized its finances and brought in new managers from outside the company. Unprofitable stores were closed, others modernized and thousands of employees laid off. A new strategy, backed by massive advertising, was instituted to bring younger and more style-conscious shoppers back to Eaton's.
But the sudden change succeeded only in alienating the store's traditional customers. In May, with losses continuing to mount, the new managers announced that they were reluctantly putting the chain up for sale.
The end came last week after Federated Department Stores, owner of Bloomingdale's and Macy's, concluded there wasn't enough value left in the Eaton's name and locations and backed away from a deal. Shipments of goods were halted, the doors of the nine Quebec stores were closed, and the Eaton boys reportedly were cleaning out their offices at the flagship store in Toronto. At the 55 remaining stores, thousands of employees learned they will probably lose their jobs.
The demise of Eaton's is likely to add to a growing anxiety about the competitiveness of some of Canada's most basic industries. Earlier this year, the country's leading timber company, MacMillan-Bloedel Ltd., was purchased by U.S.-based Weyerhaeuser Co., and a handful of high-profile companies in Calgary's booming oil patch have recently been snatched up by American rivals.
Prospects for Canada's two main airlines have become so bleak that the government suspended antitrust laws for a month while the two conduct talks with each other and several U.S. carriers aimed at restructuring the market.
In its heyday, Eaton's was a fierce competitor and a determined innovator. Timothy Eaton, an Irish immigrant, was the first merchant to adopt fixed prices and a no-questions-asked return policy that continues to this day. Eaton's was the first store to close on Saturday afternoons to give staff a longer weekend, and the first to share profits with employees. It opened factories to turn out clothing, stoves and farm implements for Eaton's shelves.
The Eaton's catalogue, first issued in 1884, quickly became a staple of Canadian life, offering farmers easy access to a wide variety of goods, including cars, appliances and city fashions. In the days before Playboy, the catalogue's lingerie section provided the stuff of fantasies for generations of teenage boys. The 500-page books were stuffed into knee socks to provide shin pads for young hockey players.
In major cities, meanwhile, Eaton's built lavish downtown stores that became landmarks and gathering spots. Shortly after opening in 1906, the Winnipeg store was feeding 6,000 diners a day in its cafe and restaurants, and the upscale emporium that opened on Toronto's College Street in 1930 featured an art gallery, a lending library, a concert hall, and entire rooms with period furniture and paneling from England and France.
Christmas in Canada was an Eaton's affair. Its parades in Toronto and Winnipeg drew millions of viewers in person--and later on television. Crowds lined up 10 deep to view Eaton's elaborate Christmas window displays. Although children might run into an old guy with a red suit and a white beard at any number of locations, they knew that the real Santa was the one at Eaton's.
"There was a very special aura about Eaton's," recalled Harry Rosen, a noted men's clothier. "It wasn't just a store--it was an institution."
The aura was surely augmented by the Eaton family's lifestyle. Founder Timothy Eaton took delivery of the first Packard in Canada in 1906 and liked it so much he ordered another. His son, Sir John Eaton, built a 50-room mansion in Toronto, traveled around the country in a private rail car and a pair of private planes, then bought a 172-foot steamer for his annual crossings to Europe. In time, family members built their own hospital and church.
Not even a looming world depression could shake the Eatons' confidence that their fortune was secure. When rumors began to spread in 1929 that the family might have to sell some of its stock to raise cash, Lady Eaton issued a terse denial: "You could as easily purchase the Bank of England."
In time, however, this smugness became the undoing of the Eaton's empire. Succeeding generations of Eatons gradually lost touch with their middle-class customers as well as with their underpaid employees, whose efforts to unionize were met with stiff and successful resistance. In Quebec, Eaton's English-speaking sales staff became a symbol of Anglo insensitivity to the French-speaking majority, while the company's reluctance to hire Catholics and Jews did not bode well in an increasingly multicultural Canada. At the top of the company, family members were too cheap and too proud to bring in high-priced executive talent to make up for their own shortcomings.
After World War II, Eaton's was late in adopting almost every major retailing innovation, such as moving to the suburbs and accepting major credit cards. It hung on to departments such as furniture and electronics long after other department stores had conceded those categories to specialty stores. It kept open its catalogue operation for at least a decade after it began losing money. And its switch to everyday low prices proved a disaster in a country where consumers love to shop sales.
By the time most other stores were perfecting just-in-time inventory control, Eaton's was still hobbled with a warehouse operation that took six weeks to get goods from suppliers to its shelves.
"It was really mismanagement, more than anything else, that killed Eaton's," said Robert Herber, a retail consultant in Toronto. "Even as early as the 1960s and '70s, the stores themselves were only breaking even. The only profit they were making was from their real estate and credit card operations."
It was not surprising, then, that two years after Wal-Mart entered the Canadian market in 1994, it was able to claim 24 percent of the country's department-store sales. By then, Eaton's had slipped to fifth place, with only a 12 percent market share. Its sales last year of about $1 billion were no higher than they had been 20 years before.
"Eaton's came to stand for nothing--not the lowest price, not the best depth in merchandise and not the best service," wrote Donald Thompson, a business professor at York University.
In Toronto last weekend, 71-year-old Grace Simmons arrived at the flagship downtown store as if to a wake, with a lifetime of Eaton's memories and a final bill to pay.
"I felt terrible, but I knew this was going to happen," she told a reporter for the Globe & Mail newspaper. "You could see it coming."
T. Eaton Co.
Business: Department-store chain.
Origins: Timothy Eaton opened his first store in Toronto in 1869.
1999* sales: $1.08 billion
1999* net loss: $48.4 million
Ticker symbol: ETN on the Toronto Stock Exchange**
Web address: www.eaton.ca
*For fiscal year ended in January
**The TSE said yesterday that it was reviewing the listing of Eaton
SOURCES: The company, Bloomberg News
CAPTION: A shopper pushes against a locked door at an Eaton's store in Montreal. The chain suddenly closed all nine of its Quebec stores on Friday.
CAPTION: A couple peer into a brightly lighted but shuttered store in Montreal. Fifty- five other stores across Canada are open as the chain plans its liquidation.