Drawn by a strong currency and fashion-hungry consumers, U.S. and European retailers are

altering Canada's apparel landscape and turning a once skimpy retail scene into a

shoppers' paradise.

The biggest headline so far in Canada's clothing retail evolution occurred in July, when

Hudson's Bay Co. was sold to the U.S.-based NRDC Equity Partners, the owner of Lord &

Taylor and the Fortunoff jewelry and housewares chain. Hudson's Bay, known as Hbc, is

North America's oldest continually operating company - its first director was a cousin of

King Charles I and it dominated the region's fur trading for centuries.

Hbc's 605-store chain, which inc ludes The Bay department stores, has struggled in recent

years as consumer preferences have shifted to specialty stores. Those shops, many from the

United States and Europe, now account for 67 percent of the Canadian retail clothing

market, and NRDC says it intends to compete.

"The Canadian consumer is more interested in better quality, better brands and better

service than what's been served up to them in the past," said Richard Baker, NRDC's chief

executive and now the 38th Hbc governor. "That is why you're seeing a lot of international

brands in Canada.

"I wouldn't overstate it. The Canadian market is not nearly as free-spending as the U.S.

market has proven to be. But having said that, it's not as moderate as it's been presented to

be, either."

Spurred by the end of the World Trade Organization's quota system in 2005, booming

petroleum and commodities sectors and a strong Canadian dollar, foreign retailers -

especially the fast-fashion chains - have expanded aggressively in Canada in recent years.

Hennes & Mauritz of Sweden added nine H&M stores in Canada last year, including

locations in Vancouver and Quebec, and intends to open seven more this year, bringing

the total number in the country to 42.

Mango, the women's fashion chain from Spain, selected Canada as its point of entry into

the North American market, opening five stores in 2005. It expects to have 25 by 2010.

And Zara will open its 15th Canadian store in the Quebec community of Point-Claire later

this year.

Menswear also is expanding. Brooks Brothers, the 191-year-old U.S. clothier, will open its

first Canadian store in Vancouver next spring, with stores in Toronto and Calgary to follow.

The decision was the result, at least in part, of Canadians' cross-border visits to U.S. stores

and the fact that the country already is the second largest international market for Brooks

Brothers' online operation.

"They have a good knowledge of what the brand is all about," said Eraldo Poletto, president

of international business for Brooks Brothers. "The timing is right."

There appears to have been a similar thought at NRDC, a partnership of shopping center

and real estate developers and owners that had a 20 percent interest in Hbc before it

bought the entire business for about $1.2 billion.

In recent years, investors have been mining retail giants for their real estate assets. And

NRDC, according to Baker, looks for "high-quality branded operating companies that run

over an owned and low-rent real estate platform." It purchased Lord & Taylor, the oldest

U.S.-based retailer, in 2006 and then bought Fortunoff earlier this year.

With Hbc, the partnership gets Canada's most iconic brand name and a real estate platform

totaling more than 47 mill ion square feet. As it did with Lord & Taylor, NRDC will "review

every store, understand which should be left alone and which should be modified,"

according to Baker.

NRDC says that within a year it may open 10 to 15 Lord & Taylor stores in Canada to fil l the

retail gap between The Bay and the more upscale Holt Renfrew, a Canadian-owned chain.

The Lord & Taylor stores could be new locations or renovations of oversized or

underperforming Bay stores, it says.

The company also plans to broaden The Bay's product line. In women's fashion, The Bay

has been the exclusive retailer of Ralph Lauren sportswear, Calvin Klein and Valisere

lingerie; its men's brands ranged from Tommy Bahama to Perry Ellis. But, at Lord & Taylor,

NRDC has introduced about 160 new brands.

"When I talk about The Bay, they need to have a greater range and variety of brands and

have greater quality brands," Baker said. "Are we selling Diesel jeans? Are we selling Hugo

Boss? Are we selling Cole Haan? These are brands we should be selling."

While the Hudson's Bay Trading Company, or HBTC - the new holding company for the

combined operation of Hbc, Lord & Taylor, Fortunoff and other assets - accounts for annual

retail sales of more than $8 bill ion, the ultimate challenge will be changing Hbc's culture,

according to Baker.

"The people who've been running The Bay have had, in a sense, a monopoly," he said.

"Unlike in the United States where we wake up every morning analyzing what our

competitors are doing, feverishly pricing the product, competing for brand, making sure our

offerings and sales are competitive - they haven't been focused like that."