Despite holding out hope it can avoid a full shutdown, Hudson’s Bay says it is planning an “immediate” liquidation that would begin next week and wrap up in June.
In a late Friday announcement, Canada’s oldest company said it couldn’t secure the necessary financing to keep at least some of its empire alive.
A closure of the entire business, which is planned pending a court appearance set for Monday, would mean job losses for 9,364 employees the company has in Canada across its Hudson’s Bay stores, as well as three Saks Fifth Avenue stores and 13 Saks Off 5th locations it owns through a licensing agreement.
Though the situation looks bleak, the company said it remains optimistic it can drum up capital and find a solution with key stakeholders, particularly its landlord partners, to avoid a full shutdown.
“Our team has worked incredibly hard to identify a viable path forward, and our resolve is strengthened by the overwhelming support from customers and associates who have shared heartfelt stories about Hudson’s Bay and what our stores have meant to them, their families, and their communities across the generations,” said Hudson’s Bay president and CEO Liz Rodbell in a statement on Friday night.
“These powerful experiences remind us why we must continue to pursue every possible opportunity to secure the necessary support from key landlords and other stakeholders to save The Bay.”
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The department store chain dates back to 1670 and now spans 80 stores.
Hudson’s Bay said it plans to sell off its assets over the coming months, pending court approval, which could include an auction process if it receives multiple qualified bids.
The company said a store-by-store liquidation is necessary because it has only secured “limited” debtor-in-possession financing—a form of capital companies can seek for restructuring purposes after they make creditor protection filings.
It said that “without an immediate liquidation across retail stores, it is not expected” that Hudson’s Bay would be able to repay its obligations under the financing it did secure.
Given the company’s “limited liquidity,” it wants to conclude the liquidation process by June 15, Jennifer Bewley, the chief financial officer for Hudson’s Bay’s parent company, said in an affidavit filed in court Friday.
The company’s plea for help comes roughly a week after it laid bare its financial struggles in a creditor protection application it made with the Ontario Superior Court of Justice.
In its application, Hudson’s Bay said it was facing financial struggles because of subdued consumer spending, trade tensions between the U.S. and Canada, and post-pandemic drops in downtown store traffic.
The filings show the company owes more than $950 million to 26 pages’ worth of listed creditors: landlords, suppliers and other partners, including fashion heavyweights Ralph Lauren, Chanel, Columbia Sportswear, Diesel and Estee Lauder.
Bewley said in a March 7 court filing that the business had to defer certain payments to such companies for many months because it was having so much trouble making payments to landlords, service providers and vendors.
The situation was so severe that she said a landlord “unlawfully locked” Hudson’s Bay out of a store located in Sydney, N.S. and a team of bailiffs attempted to seize merchandise from another location it runs in Sherway Gardens, a suburban Toronto mall.
The March 7 filing was not meant to be the precursor to the closure of the business because Hudson’s Bay was intent to on keeping the company alive and as much of its sprawling footprint operational as possible.
One week later, the company finds itself in much more dire shape, saying its “exhaustive” efforts haven’t turned up the financing it needs.
Hudson’s Bay laid the groundwork for its creditor protection case when it spun its U.S. Saks locations off into a separate entity last year after it purchased luxury department stores Neiman Marcus and Bergdorf Goodman, essentially saving them from the impending closures now set to engulf HBC in Canada.
A full liquidation in Canada wouldn’t just plunge a large portion of the country’s retail workforce into unemployment but would also leave anchor tenant spaces in malls and prestige real estate in high-traffic shopping districts in need of filling.
The sites Hudson’s Bay operates in often contain several floors and make up significantly more square footage than other retailer businesses.
The bulk of the company’s stores are in Ontario, where it has 32 locations and more than half of its employees work. B.C. hosts 16, Alberta and Quebec each have 13 and Manitoba, Nova Scotia and Saskatchewan have two per province.
Saks Fifth Avenue’s Canadian sites are split between Ontario and Alberta and Saks Off 5th has stores in Ontario, B.C., Alberta, Quebec and Manitoba.
While the company’s coast-to-coast footprint and its 17th century fur trade origins have made it a quintessential part of the fabric of Canada, it has been led by Americans for several decades now.
American real estate kingpin Richard Baker’s 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 and then turned it private again with a takeover bid that had to be boosted twice to earn shareholder approval in the weeks before Canada was hit with COVID-19 pandemic lockdowns.
Shareholders were difficult to appease in part because Baker presided over HBC while its stock was dropping—but many thought the company still carried immense value in its real estate.
When he gained their approval, he admitted the brand had work to do.
“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.
A handful of store closures and piecemeal layoffs over the last two years suggest that unleashing that potential was not easy as rivals like fellow Canadian department store Simon’s expanded and online giants such as Amazon gobbled up sales.
