After a week spent seeking a lifeline, an Ontario court has given Canada’s oldest company permission to start liquidating all but six of its stores on Monday.
The Friday approval from Ontario Superior Court judge Peter Osborne allows the retailer to begin selling off inventory at most of its 80 Hudson’s Bay stores, three Saks Fifth Avenue locations and 13 Saks Off 5th shops in Canada.
“This is the art of the possible and we are where we are today. In my view, there is no other alternative,” said Osborne on Friday.
The six stores being saved from the liquidation sale include the flagship on Yonge Street in Toronto, as well as a store in the city’s Yorkdale mall and another farther north in Hillcrest Mall in Richmond Hill, Ont. The remaining three span Montreal, the Carrefour Laval mall and Point-Claire, Que.
The company didn’t say how deep discounts will be during the liquidation running until June 15. It will vacate all liquidating stores by June 30.
The move could save some of the 9,364 jobs that would have been lost had the company moved to liquidate all of its stores, which was the plan until recent sales exceeded expectations, allowing for it to keep six alive.
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“If a solution can be found, there is an opportunity to pull additional stores out of the liquidation, but if a restructuring solution is not found very quickly, (the six) will be added to the liquidation sale,” Hudson’s Bay lawyer Ashley Taylor said in court Friday.
The ruling marks a glimmer of hope for the company, which filed for creditor protection on March 7. The request showed the company was facing significant financial challenges and was desperately in need of cash to continue making even basic payments that sustain the business.
While it suffered from reduced consumer spending, Canada-U.S. trade tensions and a post-pandemic slide in downtown store traffic, it deferred payments to landlords and suppliers and eventually had to resort to seeking financing, which pushed it toward liquidation.
Six stores are now able to be saved because the looming liquidation triggered a flurry of sales from customers looking to snap up Hudson’s Bay’s famed stripes products and other home goods and apparel.
The cash from the sales will allow the company to pay a joint venture with RioCan Real Estate Investment Trust, which it owns some real estate through, up to $7 million monthly in rent. It can now also pay back $16 million in financing it received from Restore Capital earlier in the month to keep it afloat.
Taylor said Friday the company will continue to “work hard” to find a “more long-term solution” for its financial woes, but warned the window to achieve this “remains very short.”
While the company carries out the work, it will start a sales process for assets like its leases and Canadians will see deals at stores set to be gutted.
Whether they shop in person or online, they will find Hudson’s Bay has paused its loyalty program, which has 8.2 million Canadian members with about $58.5 million in unused points. It will stop accepting the $24.2 million outstanding gift cards consumers have after April 6.
All sales will be final at the liquidating stores, Hudson’s Bay says.
To arrive at a judgment, Osborne had to reconcile how the company could liquidate its inventory, pursue more financing and also seek a buyer for valuable assets like its leases or even the intellectual property associated with its name or stripes products.
“I want to make sure we haven’t sold the jewels in the crown … so to make a better outcome impossible,” he said in court earlier this week, hours before he reserved his judgment for the day and urged the lawyers he had heard from to “lower the temperature.”
The dozens of lawyers at proceedings over the course of the week represented everyone from elevator companies who Hudson’s Bay hadn’t paid to landlords.
The property owners worried a liquidation wouldn’t just leave their malls and properties with enormous spaces to fill but would also hamper foot traffic to other tenants whose wares would become less attractive, when compared to the Bay’s reduced prices.
Hudson’s Bay lawyer Taylor used his appearances to promise the company would “cast the net as wide as possible” to find backers who could salvage or rebuild the business.
He said earlier this week that it had approached 19 lenders, but so far “the company’s efforts have failed,” necessitating liquidation.
Andrew Hatnay, a lawyer representing employees, repeatedly told the court he felt the entire process was moving too quickly because the company moved from creditor protection to a full selloff in roughly a week.
He didn’t see saving six stores as reason for celebration.
“We will see how this works out but even … if they pull something out of their hat, stores are still going down,” he told the court. “That is not a good news story.”
At stake, he said, were not just thousands of jobs, but benefits, pensions and severance. There are 21,000 past and present employees, spanning Hudson’s Bay, Saks Fifth Avenue and earlier acquisitions Simpsons, Kmart Canada and Zellers, in the pension plan, which court documents say is currently fully funded.
Employees say they are not expecting severance, which Hatnay estimates could have amounted to a collective $100 million.
“This is melancholy,“ he told the judge. ”This is the demise of HBC slowly but surely.”
