Hudson’s Bay Co. Sold
By George Anderson
American Jerry Zucker made Canada’s oldest company an offer its board could not refuse.
Hudson’s Bay Co. announced yesterday it has accepted an offer by Mr. Zucker’s Maple Leaf Heritage Investments Acquisition Corporation to buy the company in an all-cash deal pegged at roughly $1.5 billion.
Mr. Zucker said in a released statement: “As the company’s largest shareholder for more than two years, we are aware of the tremendous opportunities available to Hbc. We look forward to working with management and associates to build upon the company’s strong position and dynamic growth opportunities. We are committed to enhancing our customers’ shopping experience through a substantially greater focus on service and revitalizing the spirit of the organization. Through the implementation of more efficient methods, we will positively differentiate Hbc from its competitors.”
Hudson’s Bay Co. president and CEO George Heller said, “We are anxious to get to work with Mr. Zucker on realizing the value that we know is inherent in this great company.”
Hudson’s Bay, which operates more than 500 stores under the Bay and Zellers banners, got its start at fur trading company back in 1670. Some have expressed concern that the chain would lose its Canadian character with an American as the owner.
Robert Johnston, vice president of strategy at Maple Leaf Heritage Investments and a Canadian citizen, told CBC News, “This company has been a Canadian icon into its fourth century now. Having a foreign owner of this company will no way change or diminish that.”
While many expect store closings to come, Mr. Johnston said, Maple Leaf has no concrete plans in that regard.
“We will take this one day at a time with a meaningful focus on rebuilding the brand, the image and the performance of each and every individual store,” he said.
Mr. Johnston said that the deal will put Hudson’s Bay in a position to compete with the likes of Wal-Mart in the future.
“The issue of Wal-Mart is difficult for retailers globally, but clearly by not being a public company in the future, HBC won’t need to make decisions which are based on making the quarter. Now we’ll be able to focus on the medium and the long term,” he said.
Wendy Evans, president of the retail consultancy Evans & Co., said consumers probably will not see any immediate changes but, down the road, divisions of the company may be spun off or sold.
Moderator’s Comment: Will being owned by an American mean Hudson’s Bay Co. will lose its Canadian character? What does the company need to do to improve
its competitive position?
Robert Johnston pointed out to CBC News that this is not the first time that Hudson’s Bay has been under foreign ownership.
“You have to recognize that this company was owned by foreigners up until three decades ago. It was, in fact, headquartered in the United Kingdom,” he said.
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George Anderson – Moderator
As noted in RetailWire comments several months ago, Canadian demographics don’t match USA demographics. Canada’s average age is much younger, and there are only 3 major metropolitan markets, with Toronto by far the most important. So there’s a great opportunity to be fashion-forward. The ownership’s nationality doesn’t matter. Being customer-driven is job #1. Mr. Zucker has no USA retailing organization to “take over.” If he’s smart, he’ll keep capable Canadian executives and hire more of them, too. And he might sell some of the real estate. Is that a betrayal or just a reasonable business practice?
In the executive offices of HBC in downtown Toronto sits the original charter for the company from King Charles II complete with a massive royal seal. The charter is the size of one of my old Pink Floyd posters and is contained in an archival case suitable for a document more than 330 years old. The company has seen the demise of many competitors, most notably Eaton’s in the last decade. The reason HBC has survived is that it has remained true to its Canadian heritage and bridged the gap between the US and Europe both in terms of product offerings and merchandising approach. The company was caught a bit off guard by the entrance of Wal-Mart into the Canadian market, particularly in its Zellers division, but can revitalize itself by focusing on quality products and customer service. They also need to move stores away from their traditional downtown base and to where the shoppers are shopping, i.e. the suburbs. And they need to further develop the online offering, which isn’t bad now, but doesn’t seem to be coordinated with the general retail offering. I truly hope the new owner devotes the proper resources to make this company great again.
From being a Canadian retail and highway “enthuiast,” I travel to Toronto quite a bit to get away from the hustle and bustle of Chicago.
Toronto, a city with the 20 lane wide 401 Freeway and tens of other large freeways, vast infrastructure, European cosmopolitan lifestyle, comfortable living standards, and large areas open for development, I would have expected Canada to be as strong as the retail scene in American. Toronto, which seems like an endless shopping metropolis much like Chicago, New York, Los Angeles, Minneapolis or Houston, disappointed my retail desires. There was nothing revolutionary or exciting, except in the grocery store segment.
From what I have seen, HBC and Sears are the only main line department stores, while here in the USA we have everything from Parisian to Macy’s to Saks to Neiman’s and many others.
I was all excited to visit my first The Bay dept. store at Yorkdale Mall at Allen Road and Hwy 401. Upon entering, the Cosmetics department seemed to shimmer with high quality design and a vibrant atmosphere. Then I went looking for the men’s department expecting to see at least items sold in Marshall Field’s or LS Ayres with names such as DKNY, BCBG, and Kenneth Cole. HBC didn’t have any of these designers and HBC is THE only mainline department store in Toronto (similar to Field’s in Chicago). I found out that I needed to go to the specialty dept. store Holt Renfrew if I wanted to find items of this caliber. Holt Renfrew was excessively snotty and overpriced compared to that of Neiman Marcus or Saks., so if I lived in Toronto, I would have stuck with HBC…but that means I would be limited to Polo, Calvin Klein and Nautica, PERIOD. If I wanted anything trendy, I would have to go to Holt’s. The rest of the store was rather bland design wise. While the first floor was remodeled nicely, the second floor hadn’t been touched since the store opened in the 1970’s. Mattresses were strewn about the bedding department, electronics were tucked away in a back corner and restrooms were old and outdated.
One positive was HBC’s IT initiatives. They had the new IBM flat panel AS400 register systems along with a Nortel Networks communication system in each store that was used for paging and customer service.
So long story short, Mr. Zucker will really be able to pull this off if he can create a Macy’s , Dillard’s or at the highest end, Nordstrom out of HBC stores….
After researching Mr. Zucker, I personally believe he has a personal affinity for HBC and he honestly wants to improve HBC. He wants to make Zellers a Target and HBC a Marshall Field’s type store. He wants to bring more high style design to the stores fashion and improve the interior visuals of the stores.
In terms of Canadians opposition to Mr. Zucker’s American status, Canadians do have to realize that up until 1970, HBC was run from Great Britain. It has only had its office at Yonge and Bloor in Toronto since the 1970’s after previously being run in Winnipeg.
I do believe Zucker should keep a corporate office in downtown Toronto and market and support the stores from there.
It also doesn’t help that most of the shopping centers in the Toronto area seem fairly outdated. The newest one named Sherway Gardens was pretty upbeat, but still possessed the low-ceiling corridors much like malls of the 1980’s USA.
HBC has HUGE potential!
“No one has mentioned the possibility of this being a real estate play…” well, not exactly: some insightful soul – oh yeah, it was me (!)- brought this up in 12/05 discussion on Sears Canada; and it perhaps remains a possibility, with Macy’s/Bloomies and or Nordstrom gaining access to sites in some of the larger metro areas. The problems, IMHO, are (1) the massive floor areas in the larger downtown stores (a million gsf in the Toronto store ); multiuse conversion is, of course, a possibility, but it would probably have to be a collaborative effort (2) the smaller (relative to the U.S.) size of the markets (smaller both in terms of population and income levels) means probably only a half dozen or so areas would qualify, and that’s such a scattered proposition, I’m not sure it would make sense.
Back to the question at hand, I’m not exactly sure what a “distinctively Canadian enterprise” means: certainly down here, but even to a (disturbingly) large degree up there, it has come to mean a rather slower-paced and – well – duller version of its southern cousin.
Anyone wondering why Canadians are afraid of having their beloved HBC sold to an American needs to look no further than the comments above for their answers. The popular axiom is that Canada is just another version of the U.S., just a little further North. But that is patently wrong.
We are not a rich retail landscape because we are a less consumer-oriented nation. Canadian retailers are not boring or dull, they are just different.
I do agree that there is a large retail gap between Holt’s and The Bay and hopefully this acquisition will fill that nicely. But be warned: Plowing into this nation with ideas of painting everything red white and blue will be met with a great deal of resistance and hostility.
No one has mentioned the possibility of this being a real estate play like what happened with Kmart. I’ve done a few site studies around Canada for the new owner of properties occupied by The Bay. I’m wondering if losing its Canadian character is even an issue.
From what I have seen of Zellers, they are no match for Wal-Mart. To me, they are heading in the same direction as Woolco and Kmart in Canada. The Bay is more upscale and still seems to be the top upscale retailer anchoring the malls. As far as what they need to do to improve their competitive position … probably the same canned responses we see repeated over and over like when we discuss Sears and Kmart. But does Hudson’s Bay really want to improve? Those downtown locations in Canada’s major cities could be the next Whole Foods sites generating huge rents.