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TORONTO — Canada’s oldest retailer, Hudson’s Bay, has filed for creditor protection and intends to restructure the business.
The department store company that dates back to 1670 announced the move Friday evening, saying it has been facing “significant” pressures, including subdued consumer spending, trade tensions between the U.S. and Canada and post-pandemic drops in downtown store traffic.
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“While very difficult, this is a necessary step to strengthen our foundation and ensure that we remain a significant part of Canada’s retail landscape, despite the sector-wide challenges that have forced other retailers to exit the market,” Liz Rodbell, president and CEO of Hudson’s Bay said in a press release.
“Now more than ever, it is critical that Canadian businesses are protected and positioned to succeed.”
As part of the filing it made with the Ontario Superior Court of Justice on Friday, Hudson’s Bay said it was exploring several strategic options to strengthen its business and said it would not make promises but was committed to preserving jobs where possible.
While the process can lead to the sale or closure of a business, Hudson’s Bay appears intent on avoiding those possibilities and keeping much of its sprawling retail footprint alive.
The company has 80 Hudson’s Bay locations that sell everything from apparel to housewares, cosmetics and furniture.
Through a licensing agreement, it also owns three Saks Fifth Avenue stores and 13 Saks Off 5th locations in Canada, which will continue to operate.
Saks Global, which owns U.S. Saks locations as well as Neiman Marcus and Bergdorf Goodman stores, is not connected to the creditor protection filing that was made as the U.S. continued to threaten Canada with additional tariffs Friday.
Rodbell said the U.S.’s earlier provocations had already harmed Hudson’s Bay. While the company was negotiating with potential investors to bring more liquidity to the business, the threats and eventual implementation “created significant market uncertainty” that ultimately stopped any possible deals form closing.
She was hopeful a $16 million advance and Friday commitments from U.S.-based investment management firm Restore Capital and other lenders, meant to provide interim debtor-in-possession financing, would help Hudson’s Bay weather the turmoil. The company said it hoped to secure additional financing in the days ahead.
The company spent the last several years in a state of deterioration as it closed several stores and carried out several rounds of layoffs.
In orchestrating prior cuts, it cited “challenging headwinds” that made it necessary to slash its workforce and pull out of a store redevelopment at the Oakridge Park shopping centre in Vancouver.
Its Friday court filings showed its financial troubles ran deep.
Jennifer Bewley, the chief financial officer for Hudson’s Bay’s parent company, said in an affidavit filed in court that the business is having trouble making payments to landlords, service providers and vendors and has had to defer certain payments for many months.
Bewley said the company would be days away from failing to meet its payroll obligations, if it doesn’t receive more funding. It has 9,364 employees, the court filing says.
“Without the benefit of court protection, failure by Hudson’s Bay to pay rent at its stores will result in a rapidly escalating chain of events, leading to lease defaults,” she added.
In the months leading up to the filing, Hudson’s Bay’s regression was evident across the department store’s floors.
When its crown jewel location on Queen Street West in Toronto closed its Food Wares market, it haphazardly filled the food counters and display cases with a growing array of Zellers merchandise rather than remodelling the wing.
Even more recently, grocer Pusateri’s Fine Foods and coffee purveyor Nescafé decamped, further emptying the store, which has appeared to be in a state of disrepair with escalators often broken and many departments begging for some TLC.
Hudson’s Bay made some tweaks to its product mix last year, bringing in Target’s kid brand Cat & Jack and returning womenswear banners Ann Taylor and Loft to Canada. Yet some felt the changes weren’t working.
“I did a walk-through just to see what was going on and crickets,” Liza Amlani, the co-founder of the Retail Strategy Group, told The Canadian Press last summer.
“There were no people. There was excessive markdowns, rails and rails of product, which tells me that either the buying team (or) the planning team does not know what the Canadian customer is looking for.”
Amlani’s comments came when Hudson’s Bay parent company was experiencing a glimmer of hope last summer as it purchased Neiman Marcus and its Bergdorf Goodman banner for US$2.65 billion.
The plan was to combine the luxury department stores with the Saks Fifth Avenue and Saks Off 5th chains it already owned in a new entity called Saks Global.
As part of the transaction, e-commerce goliath Amazon and software giant Salesforce were expected to become investors in Saks Global.
Some Neiman Marcus staff were laid off last week as the company prepared to consolidate its U.S. office space and cut the banner’s Dallas flagship.
Meanwhile, its nearest Canadian competitor, Simons, is in growth mode with a $75-million expansion plan. The 185-year-old dry-goods-shop-turned-department-store-chain will open locations in the Yorkdale and Eaton Centre malls in Toronto, where Hudson’s Bay has long been an anchor tenant, later this year.
The architect behind most of Hudson’s Bay’s modern history is Richard Baker, an American real estate titan whose National Realty and Development Corp. Equity Partners bought Hudson’s Bay in 2008 from the widow of late South Carolina businessman Jerry Zucker for $1.1 billion.
Baker took the company public in 2012 only to reverse course through a takeover bid that had to be sweetened twice before shareholders accepted it in early 2020 ahead of the COVID-19 pandemic lockdowns.
In the lead-up to the privatization vote, Baker faced criticism for HBC’s stock dropping while he was at the helm and for not better utilizing the company’s real estate, which includes several prized locations in high-traffic shopping districts.
After the privatization was approved, he acknowledged there was work to be done and said it would start with a new website for Hudson’s Bay.
“It will take patient capital and a long-term view to fully unleash HBC’s potential at the intersection of real estate and retail,” he said in March 2020.
Court documents say the company “pursued an aggressive e-commerce expansion strategy” that cost $130 million and involved the hiring of 500 people between 2021 and 2022.
By 2023, the documents say Hudson’s Bay was in cost-cutting mode, reducing both its workforce and marketing budget to uncover $100 million in savings.
It also sold valuable lease rights and reinvested the proceeds into its retail operations and tweaked its merchandise assortment and promotions to try to stage a turnaround.
The moves improved the company’s gross margins, but sales still declined by more than 30 per cent year-over-year, the document say.
— By Tara Deschamps, The Canadian Press
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