Hudson's Bay Unveils Ambitious Rescue Plan to Save Six Stores and Reinvent E-commerce

Hudson's Bay Co., Canada's oldest retailer, is in the midst of a critical restructuring phase, seeking an $82-million investment to salvage six key department stores and revitalize its struggling e-commerce platform.

The company, which has witnessed a staggering 33% drop in total sales to $1.11 billion for the fiscal year 2024, is facing severe challenges that have dramatically affected both in-store traffic and online retail activity.

Recent reports reveal that Hudson's Bay's e-commerce sales plummeted to $142 million—nearly halving year-over-year. This downturn is compounded by a reported loss of nearly $330 million last year, tallying the company’s financial woes.

To tackle this crisis, Hudson's Bay is actively soliciting investment offers, potentially exploring refinancing options or even selling parts of its assets, which include the six retained locations, distribution centers, intellectual property, and a significant stake in a joint real estate venture with RioCan Real Estate Investment Trust.

Interestingly, as part of its heritage, Hudson's Bay owns the original royal charter from 1670, granted by King Charles II, which allowed exclusive trading rights in what is now Canada. This artifact, alongside other historical memorabilia, will receive special consideration during the asset negotiation process due to its deep-rooted significance in Canadian history.

On March 7, the company sought protection under the Companies' Creditors Arrangement Act and has since commenced liquidation of all but six stores, including 74 Hudson's Bay locations and multiple Saks brands in Canada. To ensure its survival, Hudson's Bay plans to submit a motion to the court to approve bidders and has set a binding proposal deadline for April 30, aiming for court approval of a successful bid by May 30. Should an auction be necessary, it will take place in mid-May.

The restructuring strategy emphasizes a leaner operation that focuses on the six stores identified as having a clear path to profitability. While the proposal outlines a projected loss of $58 million for fiscal 2024, it optimistically forecasts a return to profitability within two years, contingent on securing the needed capital investments of $68 million for merchandise inventory and $12 million for operational capital.

In addition to its retail operations, Hudson's Bay is putting its intellectual property on the market, including its iconic stripe design featured on its point blankets. Following revelations of the company's financial difficulties, sales of these striped products surged, producing $5.6 million in revenue—over 70% of the previous year’s total for that category.

Moreover, the retailer's private-label brands, such as Hudson's Bay, Distinctly Home, and even a revitalized Zellers, which has made a comeback within Hudson's Bay stores, accounted for 12% of the company's sales last year. This diversification could be key to bolstering sales as the company navigates these turbulent waters.

On the real estate front, Hudson's Bay is also evaluating a portfolio of valuable properties, with estimations suggesting that their joint-venture real estate is worth nearly $1.1 billion. However, these assets carry $725 million in total debt. Assessments of their leasehold arrangements vary; many ground leases have substantial remaining terms, providing a potentially stable revenue stream for the company moving forward.

As Hudson's Bay endeavors to turn around its fortunes, all eyes are on the unfolding auction process that could redefine the future of this historic Canadian retailer. Can Hudson's Bay rise from the ashes, or are we witnessing the final chapter of an iconic brand? Stay tuned as this story develops!