Yahoo Finance Hudson's Bay Company looks at possible sale of Lord and Taylor
Hudson’s Bay Company is reviewing its strategic options for its Lord and Taylor business, one of which is a potential sale of the division.
The Canadian retailer announced Monday that it is “pursuing strategic alternatives” for the U.S.-based department store chain, including looking at a possible sale or merger, as chief executive Helena Foulkes continues to simplify operations.
“The review of strategic alternatives for Lord and Taylor is another example of how we are exploring options to position HBC for long-term success,” Foulkes said in a news release.
Since Foulkes joined the company in February 2018, HBC has been focused on simplifying the company’s overall business, while at the same time improving its existing operations and capitalizing on the value of its real estate.
The potential sale of the Lord and Taylor business comes after HBC announced in February it would be shuttering its Home Outfitters businesses, as well as reviewing its 133 Saks Off Fifth stores and closing 20 U.S. locations. The company said at the time the decision to shrink its profile was part of a “strategic plan to reduce costs, simplify the business and improve overall profitability.”
David Weiss, a partner at McMillanDoolittle LLP, said the move to sell Lord and Taylor was not a surprising one, given the brand has been struggling for an extended period of time.
“HBC has so many different strategies in place in order to grow and be profitable that focusing on Lord and Taylor, which has been struggling for so long, is probably a waste of time and energy,” Weiss said.
But whether the company will be able to line up a buyer for a quality price remains to be seen.
“The big question is who would buy it. There are too many stores in the United States, and we’re talking about a sector that is shrinking,” Weiss said.
“I think this is really going to be a tough sell.”
On a conference call with analysts last month following the release of fourth quarter financial results, Foulkes pointed to the company’s two largest businesses – Saks Fifth Avenue and Hudson’s Bay – as “the greatest opportunities for long term growth.” Foulkes also said the focus at Lord and Taylor was “prioritizing profits over growth ... with an emphasis on continuous improvement.”
According to HBC, Lord and Taylor brought in $1.4 billion in revenue in 2018 – but the chain has certainly been struggling.
Comparable sales at the company’s department store division, which includes Lord and Taylor, fell 5.2 per cent in the three month period ending February 2019. Sales in the fourth quarter of 2018 “continued to decline year-over-year” at Lord and Taylor, HBC said.
Bruce Winder, a partner at the Retail Advisors Network, said selling the Lord and Taylor business would be the right move for the company, providing they can find a buyer willing to purchase it at “a fair price.”
“I think it’s primed to be divested,” Winder said.
“If HBC can sell it, they can use that money to either pay down some debt or fund initiatives to reinvigorate their core business, which in my opinion is Saks Fifth Avenue.”
HBC completed an acquisition of Lord and Taylor in 2012. It currently operates 45 stores in the northeastern and mid-Atlantic U.S.
HBC has retained PJ Solomon, a U.S.-based financial advisory firm, to conduct a review of the Lord and Taylor business.
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