Move over, Nordstrom (JWN), you’re not the only luxury retail stock looking to capture the Canadian market. Set to open its first store in Calgary Sept. 19, 2014, JWN has already begun its search for managers. But in nine short months, the competitive landscape in luxury retail in Canada will change dramatically.

No longer will Holt Renfrew and Hudson’s Bay (HBAYF) own for themselves the luxury segment of the department store retail marketplace. While Nordstrom is the first entrant from south of the border, more are likely to follow. Can Hudson’s Bay and Holt Renfrew do enough to hold off the competition?

Yes and no. I’ll explain.

Sears Implodes

Nordstrom’s move into Canada has come on the back of Sears Holdings’ (SHLD) crumbling empire. Sears has been selling anything of value, and Sears Canada (SEARF) held some valuable leases that others could use more profitably — Nordstrom, for example. First, Sears sold leases in Vancouver, Calgary and Ottawa back to mall owner Cadillac Fairview for C$170 million in July 2012. These represent Nordstrom’s first three stores in Canada.

In June of this year, Sears sold two leases at Yorkdale Mall and Square One Shopping Centre (both Toronto-area malls) back to its owners for C$191 million with an option to buy another Toronto-area mall for $53 million. Although Yorkdale Mall announced a C$331 million expansion in April that includes Nordstrom, it’s possible this expansion could be shelved now that the Sears location is available. If the mall goes ahead, Macy’s (M) or some other department store could be moved into the space. Yorkdale’s already one of the best-performing malls in North America; this would certainly push it to number one.

Finally, in late October, Sears Canada announced that it was selling five leases back to their landlords for C$400 million including its flagship store in downtown Toronto. The Toronto Eaton Centre location is highly desirable for anyone looking to make a splash in Canada’s largest city. Nordstrom is the likeliest candidate, but there will be others sniffing around. Sears has to be out by the end of February, so expect some kind of announcement about prospective new tenants by mid-2014.

Competitive Landscape

The Globe and Mail’s Marina Strauss wrote a very interesting article Nov. 27 about Richard Baker, the man behind Hudson’s Bay Company (HBAYF). Baker figured out how to extract more value from Target (TGT) — selling former Zeller’s store leases to the Minneapolis retailer for C$1.8 billion in 2011 — than the C$1.1 billion he paid in 2008 for the entire company.

Now he’s gone and acquired Saks for $2.9 billion in cash.

One of Baker’s first moves as Saks’ new owner will be to open seven stores in Canada and as many as 24 Off Fifth outlet stores. With a flagship Hudson’s Bay store at the south end of the Toronto Eaton Centre, Baker’s taking the Hudson’s Bay store four subway stops north of the Eaton Centre and converting into the second-largest Saks anywhere. Bloor Street is a popular luxury shopping district in Toronto, so a Saks location will do very well.

Shoes will be one of the biggest battlegrounds for all Canadian department stores in the years ahead. Nordstrom consistently generates almost a quarter of its revenue from shoes — its second-best category behind women’s apparel. Together, these two categories generated 54% of its overall revenue in fiscal 2012.

Fashion industry analyst Sandy Silva points out in Strauss’s article that mid-to-high-priced women’s footwear is underdeveloped in Canada. For this reason, women can expect to see much better shoe options in Canada over the next few years (which will make my wife very happy). Like retail in general in Canada, the arrival of American competition is forcing the Canadian mainstays to up their game. Whether or not they can is another matter altogether.

Pacific Northwest

Headquartered in Seattle and only 140 miles south of Vancouver, Nordstrom already has a good idea about Canadian shopping habits. Something like 15,000 Canadians already have Nordstrom cards, so you can bet the company’s been using the data to figure out what Canadians want to buy in the stores come the fall of 2014.

Furthermore, JWN has been able to watch Target stumble badly in its first year operating stores in Canada and will certainly learn from Target’s mistakes. If you look at the drawings of its first five Canadian stores, you can tell Nordstrom isn’t planning to enter Canada on the cheap.

Both Holt Renfrew and Hudson’s Bay have deep pockets. But so do Nordstrom and Macy’s if they decide to enter the market. Canadian department stores haven’t been this talked about in years. That’s good for Canadians and better for Nordstrom.

I believe Target will ultimately get its problems sorted out north of the border, taking market share from other discount competitors, both Canadian and American. Nordstrom will likely follow a similar path taking 3-5 years before it becomes clear it made a smart decision. Long-term, I like the idea of owning JWN stock.

Holt Renfrew will take about the same amount of time to figure out it’s the loser in all of this brinksmanship for Canada’s high-end shopping dollars. The combination of Saks/Hudson’s Bay could possibly lose some market share to Nordstrom, but they’ll also pick some up from Holt Renfrew.

Overall, I think HBAYF will hold its own. I’d be less inclined to own HBAYF stock over JWN, but then again, Richard Baker seems to have a Midas touch when it comes to retail, so you never know.

As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.