Relaxing in the VIP lounge at the Retail Council of Canada’s annual convention in Toronto in June 1999, Fredrik Eaton gave little sign he was troubled by the increasingly shaky future of the department-store chain that bore his family’s name. When asked by the Toronto Star whether he would have made different decisions than those that had led Eaton’s into court protection from its creditors and corporate restructuring two years earlier, he didn’t appear to care.
“The answer is no. I mean, the world goes on.”
Two months later, on August 21, 1999, after 130 years in business, the iconic Canadian retailer announced it was filing for bankruptcy.
Fredrik Eaton’s response reflected the detachment and corporate arrogance many observers felt he and his brothers George, John Craig, and Thor had displayed since the 1970s. Though they had removed themselves from day-to-day operations by the late ’90s, their presence still loomed over the company. Eaton’s had failed to adapt to changes in the retail environment, and its management eroded the goodwill Eaton’s had developed with Canadians for over a century. The list of boneheaded moves was long: ending its catalogue service in 1976, casting Toronto’s Santa Claus Parade adrift in the early ’80s, not accepting Mastercard or Visa until the mid-’80s, investing (with assistance from the provincial government) in a series of unsuccessful downtown shopping centres across Ontario, an “everyday value pricing” policy in the ’90s that eliminated promotional sales, and an attempt in 1997 to become an upscale fashion retailer. Having been treated as local royalty for decades, the Eatons did not handle criticism well. “Don’t tell me how to run my store,” George Eaton declared while serving as CEO in the early ’90s, as it was becoming obvious the no-sales policy was a flop. “I’ll run it any way I want.”
Hamilton Spectator, August 17, 1999
There was also a longstanding corporate philosophy, stretching back to federal investigations into department-store pricing back in the 1930s, which tended to avoid being too profitable in case any government demanded to look at their books again. Over time, cutbacks weakened staff morale, and creditors grew irritated at the poor financial returns. Ultimately, according to York University marketing professor Donald Thompson, “Eaton’s came to stand for nothing — not the lowest price, not the best depth in merchandise assortment, and not the best service.”
Despite its corporate restructuring in 1997 (which led to 20 store closures and the first issue of shares to the public) and a promise that its new upscale fashion identity would boost sales, the financial situation worsened. A weak Christmas season in 1998 saw sales fall 12 per cent from the previous year in December, while January 1999 saw a 31 per cent decline. A warm winter provoked deep discounts, further weakening profit margins. Suppliers grew nervous as rumours swirled about the chain’s future. Eaton’s filed a libel notice against the National Post when it suggested the retailer would again seek bankruptcy protection. By summertime, office staff were laid off, its annual meeting was postponed, and feelers were put out for buyers.
Toronto Star, August 26, 1999
Friday, August 13, 1999 was unlucky, as executives learned that talks to sell up 20 of the chain’s 64 stores to an American department store giant had collapsed. Eaton’s primary lender, GE Capital, had just provided a $35 million emergency loan to bridge the period until a sale went through. Eaton’s claimed it would seek another buyer, though a spokesperson noted that the Canadian retail environment was “a daunting and challenging prospect” for anyone interested in the company.
On August 16, Eaton’s main distribution centre in North York closed and its 300 employees were laid off. No more merchandise would be accepted, and advertising was suspended. The Eaton brothers cleaned out their offices and told their personal employees to vacate the premises. The stock price, which had initially been offered at $15 the previous year, fell below $1. CFO Hap Stephen took on additional work chairing a troubled paper company in Connecticut. “When the second-in-command gets another job,” Western University law professor Richard McLaren told Maclean’s, “that’s a pretty clear indication that it’s time to turn off the life support.” An email sent to 13,000 employees on August 17 warned that while Eaton’s “continues to explore all reasonable alternatives,” the lack of any interested buyers meant that liquidation was likely.
At store level, employees pondered their future while customers reminisced about the good old days and how, despite its efforts to target younger shoppers, Eaton’s seemed out of step with the times.
When Tommy Hilfiger seized its merchandise from Montreal locations, Eaton’s management feared other suppliers would do the same under Quebec law, so it suddenly shut all locations in that province on August 20. In Toronto, employees at the flagship Eaton Centre store downtown were told to clear out their personal belongings, just in case they suddenly closed.
The next day, the bankruptcy filing was announced. When the details emerged, it was revealed that creditors were owed over $329 million. Legal notices were posted at every store by August 23, and the Quebec locations reopened. That day, trading of Eaton’s shares was halted at the Toronto Stock Exchange after they plunged from 71 cents to 40 cents.
Hamilton Spectator, August 24, 1999.
Eaton’s was placed into receivership, and a Boston-based liquidator was hired to dispose of inventory. The chain’s major landlords went to court to prevent the liquidation sales, arguing it violated leases and would harm other tenants. An Ontario Superior Court judge ruled that the sales could go on.
The liquidation sale began on August 25, just as 600 employees were let go at head office and CEO Brett Ballantyne resigned. One surviving employee at a Toronto-area store told The Canadian Press that if any workers were late or missed a shift, they would be fired immediately. Stores were busy, but many shoppers were disappointed by the lack of deep discounts (it’s standard practice for liquidators to gradually reduce prices to maximize profit). The sales were expected to last until the end of November.
In some cities, the end of Eaton’s would leave large empty downtown spaces, with analysts predicting a dim future for downtown department stores. There was anger in Hamilton, where local officials had lobbied to keep the downtown store open during the 1997 restructuring. Moves to support the store ranged from offering two hours of free parking to moving government offices into the adjacent Eaton Centre. “The misfortunes of Eaton’s should remain as a warning for all municipal politicians,” a Hamilton Spectator editorial observed. “Hopefully, we’ve learned to stop bowing to developers’ demands in return for promises of booming futures. We now know we have to protect our communities with our own visions. Hamilton’s core cannot tolerate, nor survive, the horror of a boarded-up Eaton’s store or Eaton Centre.” As of 2024, the former downtown Hamilton Eaton’s remains boarded up, while the former Eaton Centre, later known as Hamilton City Centre, shut for good in 2022 after struggling for years.
National Post, August 24, 1999
The federal Liberal government rejected calls, including from some of its own MPs, to help save Eaton’s. “The failure of a retail enterprise of that magnitude is not something the federal government would be in position to assist,” noted Industry Minister John Manley. During a visit to Oshawa, Prime Minister Jean Chretien reminisced to reporters about buying hockey equipment from Eaton’s as a child. “It’s sad, but it’s the way society moves on. New businesses come into the market, and some disappear."
Estimates suggested that the Eaton brothers’ financial interest in the company fell from $189 million during the initial public offering to around $5 million, while their overall worth declined from $1.5 billion in 1992 to $450 million. Initially, they refused to talk to the media, prompting some reporters to approach their country homes north of Toronto. The silence broke via a letter from John Craig Eaton published by the Globe and Mail and the National Post on September 1. After admitting that he was “tired of the misinterpretations and twisting of the facts that naïve writers seem to think is their God-given right,” he wrote, “my family is in mourning, not just because of the loss of a magnificent and noble company but, more important, because of the impact on its people, both employees and suppliers.”
St. Catharines Standard, August 27, 1999
Some industry observers were not impressed by his claims that he was on a first-name basis with many Eaton’s employees across the country, and believed the family was forced to make a public statement. Retail analyst Richard Talbot felt that sending a personal letter to all employees might have been more effective, and that the brothers’ decision to pack up their offices without talking to personal staff was revealing. “If that’s what you do with your personal employees,” Talbot told the Ottawa Citizen, “how much do you care about the people who work in the stores?” In a later interview with the Toronto Star, Fredrik Eaton apologized for the cold manner (a fax) by which many employees were let go. “I hope and believe that most of them will come out of this okay. And everyone will have learned a helluva lot.” He also indicated that the brothers discussed buying full-page newspaper ads thanking customers and employees, but the time wasn’t right to do so, as “the rush to publish in the middle of an event almost invariably leads you to making mistakes.” Many newspaper stories about the family resurrected an old quote from Fredrik regarding his view of Eaton’s customers: “They don’t speak to me, and I don’t speak to them.”
Speculation ran rampant over the fate of viable locations, with the Hudson’s Bay Company and Sears Canada expected to pick up some. Landlords began plotting replacement scenarios — for example, rumours suggested that retailers ranging from Crate and Barrel to IKEA were interested in the Toronto Eaton Centre flagship store. Sears Canada announced in October that it would purchase 19 stores and stated that it intended to operate seven of those locations — including stores in Ottawa and Toronto — as a new, upscale “eatons” chain. Launched in November 2000 with an aubergine-themed campaign, the new eatons flopped quickly, ending 13 straight quarters of record profits for Sears Canada. By February 2002, eatons was dead for good.
Most liquidation sales ended in mid-October 1999 with a whimper, with the little remaining merchandise huddled into the corners of stores. “If Timothy Eaton could have seen the day his proud stores would close like this,” one shopper told the Ottawa Citizen, “he’d roll over in his grave.” The liquidator earned around $78 million.
“Is the consumer going to miss Eaton’s?” economist Sam Geist asked in an interview with the Citizen. “Maybe in out hearts. But shoppers have already voted with their feet.”
Sources: The Eatons: The Rise and Fall of Canada’s Royal Family (revised edition) by Rod McQueen (Toronto: Stoddart, 1999); the August 17, 1999, August 21, 1999, August 23, 1999, August 24, 1999, and September 6, 1999 editions of the Hamilton Spectator; the August 30, 1999 edition of Maclean’s; the August 17, 1999, August 20, 1999, August 21, 1999, August 24, 1999, August 31, 1999, and September 1, 1999 editions of the National Post; the August 18, 1999, and September 2, 1999 editions of the Ottawa Citizen; the August 21, 1999, August 25, 1999, August 27, 1999, and September 26, 1999 editions of The Record; the August 26, 1999 edition of the Sault Star; and the June 16, 1999, July 17, 1999, August 14, 1999, August 18, 1999, August 20, 1999, August 25, 1999, August 29, 1999, and September 10, 1999 editions of the Toronto Star.
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