Economics Article Summary: Impact of Home Outfitters Store Closure

This economics article summary discusses the closure of 37 Home Outfitters stores in Canada by Hudson's Bay Co., a strategic move to reduce costs and improve profitability. The analysis connects this decision to microeconomic principles, particularly the concept of firms closing when they cannot cover variable costs in competitive markets. The student expresses interest in the retail industry and the impact of e-commerce, highlighting the need for retailers to adapt. The summary also references the competitive nature of the retail industry in the US and Canada, emphasizing the importance of differentiation in attracting customers, especially with the rise of online retailers. The analysis draws upon economic theory to explain the rationale behind the closures, linking it to value creation for shareholders through portfolio rationalization and acknowledging the fixed cost losses incurred during such closures.

ECONOMICS
ARTICLE SUMMARY
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ARTICLE SUMMARY
Summary of Article
The given article relates to the closure of 37 Home Outfitters stores that are located in
Canada. This is a strategic decision by the parent company i.e. Hudson’s Bay Co aimed at
reduction of costs, business simplification along with profitability improvement. It is also
estimated that after a review the company may close down 20 stores in the US also. This will
allow the parent company to ensure that the available portfolio of stores is only those which
potentially offer the highest opportunity for future growth. The company did not highlight the
amount of employees that would be impacted by the closure. Also, some days earlier, US
based discount shoe retailer Payless ShoeSource also decided to close 2,354 stores across
North America (KewarthaNOW, 2019).
Interesting Aspect
I found the given article relevant owing to my interest in the retail industry and future career
ambitions in this industry. Right from my childhood, I have had a fascination for retail stores
with their varying formats and different product offerings. Also, during recent years, I have
seen a transformation in the retail sector particularly with the advent of e-commerce retailers.
These have completely transformed the retail landscape not only in US but also in Canada
(Arnold, 2015). However, it also presents an opportunity to the existing retail chains that
need to adapt their business model and product offering in accordance with the changing
industry landscape along with customer preferences (Mankiw, 2014). I find it immensely
fascinating how on one end some of retail chains are struggling in this environment, while
others are thriving. Through articles related to retail chains, I intend to garner greater
understanding of how different retailers are coping up with the current scenario.
Relation of article to material
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ARTICLE SUMMARY
The article highlights how firms tend to make decision with regards to closing their stores. It
is quite possible that with regards to selected Home Outfitters Canadian stores, the business
in these stores might not be able to cover the variable costs also. This is in line with the
theoretical outline presented with regards to closing of firms in competitive markets (Arnold,
2015). Owing to this the profitability of the parent company might be adversely impacted. At
a time when there is changing retail environment, value creation for the shareholders may be
possible only through rationalisation of portfolio. As a result, uneconomical stores in various
locations are being closed down. In such closures, the company would incur sizable losses on
account of the fixed costs incurred with regards to setting up of the stores. This also indicates
towards the competitive nature of retail industry in US and Canada where differentiation is of
essence to attract the customers. This is especially the case owing to introduction of online
retailers which have increased the competitive rivalry (Mankiw, 2014).
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ARTICLE SUMMARY
References
Arnold, A.R. (2015). Microeconomics (9thed.). New York: Cengage Learning.
KewarthaNOW (2019) Peterborough’s Home Outfitters store to close in 2019, Retrieved on
March 17, 2019 from https://kawarthanow.com/2019/02/21/peterboroughs-home-
outfitters-store-to-close-in-2019/
Mankiw, G. (2014) Microeconomics (6thed.). London: Worth Publishers
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