Lord & Taylor to be sold to Le Tote

Discussion
Photos: Getty Images; Le Tote
Aug 29, 2019
Tom Ryan

While some stores are partnering with or launching their own rental subscription services, Lord & Taylor, America’s oldest department store, is being bought by one.

San Francisco-based Le Tote, founded in 2012 and focused on fashion, agreed to acquire Lord & Taylor for $100 million from owner Hudson’s Bay Company (HBC).

Underscoring challenges facing Lord & Taylor and the department store sector, HBC, which acquired Lord & Taylor in 2012, agreed to cover $58 million in annual rent on Lord & Taylor’s stores that are leased for “at least” the next three years. HBC will receive an equity stake in Le Tote, two seats on its board and certain rights as a minority shareholder.

Le Tote expects to keep Lord & Taylor’s remaining 38 stores open and continue to employ most of the staff. Beginning in 2021, however, HBC can reassess the use of Lord & Taylor locations and recapture certain stores to determine their best use.

“Following an extensive review of strategic alternatives, Le Tote’s leadership and innovative approach is the best path forward for Lord & Taylor, its loyal customers and dedicated associates,” said HBC CEO Helena Foulkes.

Lord & Taylor, with sales of $1.1 billion in 2018, has lost money since 2016. In May, HBC said it was exploring a sale.

Similar to models like Stitch Fix, Le Tote members receive a monthly “Tote” of personalized items, from which they can keep what they like and return the rest.

Le Tote’s officials told CNBC and the San Francisco Chronicle that the company will add rental options and other categories to stores to better balance Lord & Taylor’s strengths in dresses and shoes.

Bolder moves in the future include a focus on smaller stores (10,000 to 20,000 square feet versus the current average of 120,000) and using the proprietary technology and infrastructure from Le Tote’s rental business to better customize Lord & Taylor’s offerings by region and to the individual customer.

Brett Northart, co-founder and president of Le Tote, told CNBC, “The customers have spoken, and people are looking for smaller, more personalized locations — that’s something we do well at Le Tote.” 

DISCUSSION QUESTIONS: Does a fashion rental subscription service have any advantage in bringing advanced personalization techniques to the department store model? What suggestions would you have for merging the department store and rental models? 

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Lord & Taylor may well reinvent itself as a 20,000 square foot retailer dedicated to digital personalization."
"Having a collection of one-offs is at odds with convenient and frictionless – you don’t need a store for what the app can do."
"Le Tote’s means to execute this sale? Low-interest rates on the back of debt financing. Sound familiar?"

Join the Discussion!

24 Comments on "Lord & Taylor to be sold to Le Tote"


Sort by:   newest | oldest | most voted
Mark Ryski
BrainTrust

This is a bold and risky move for Le Tote. While the fashion rental subscription business has had pockets of success, it represents a very small part of the apparel/fashion market. Taking on large department stores is not for the faint of heart, and adding advanced personalization to the department store model alone will likely not have a significant impact. I wish Le Tote management the best, but I’m skeptical this will be successful.

Paula Rosenblum
BrainTrust

Poor Lord & Taylor! I keep envisioning a once wealthy dowager, down on her luck living in a studio apartment in a bad neighborhood in New York City.

Passed through so many hands, losing her home, and now renting her clothes to pay the rent.

The clothing rental and subscription business(es) appears to be another one of those retail concepts that is presumed to have an infinite market. And they don’t. This is not going to end well.

Georganne Bender
BrainTrust

You nailed it, Paula!

Cathy Hotka
BrainTrust

The once mighty Lord & Taylor has been sold to a company that most people have never heard of. The value of L&T’s real estate alone justifies the low purchase price. This will probably be a short story, not a long one.

Paula Rosenblum
BrainTrust

HBC sold the iconic flagship to (holding nose) — WeWork.

This was ugly.

Ben Ball
BrainTrust

Lord & Taylor’s remaining brand equity is in fashion. Le Tote can port that equity easily enough with an eventual “L&T” combined brand. In the meantime, Le Tote can use the remaining Lord & Taylor stores to experiment with a host of storefront options including pickup and showrooming for in-store or online ordering and rental. At this price, it is much cheaper than greenfield exploration of physical stores for Le Tote — and they get a fashion brand to boot. Great deal — for Le Tote.

David Naumann
BrainTrust

Rental subscription services are built on a foundation of knowing the customer and personalizing the offering to match their preferences. While this may infuse a culture of personalization into Lord & Taylor stores, it is only one element to saving a struggling chain. While the purchase price was very low at $100 million, the risks may outweigh the rewards on this deal. Best of luck to Le Tote.

Neil Saunders
BrainTrust
This is an interesting sale which underlines two things. First, how much the value of Lord & Taylor has eroded over the past few years. Second, that there was very little credible interest in the firm from other traditional retailers or the private equity segment. Both of these facts suggest that the company’s business model is pretty broken. Can a rental company fix it? By virtue of being a rental company the answer is absolutely not. Rental is a fast growing part of the market but it is not a panacea or a fix for all ills. Lord & Taylor can no more survive by moving more into rental than can Macy’s or any other traditional player. However, some of the ideas from Le Tote are worthy. Localizing assortments is sensible, having a rental service as part of the offer will build some interest, and focusing on smaller, more personalized stores is viable if executed properly. However none of these things address the core issues: what does Lord & Taylor stand for, why is it… Read more »
Jeff Sward
BrainTrust

This is another demonstration that the old legacy department store model is at best an anachronism. And as the details of this transaction emerge, it is still a bit of a head-scratcher. I thought HBC was becoming a rent collector … not a bad alternative. But to now read they are covering $58 million in annual rent? Man, they must have really wanted out of the game. So more power to Le Tote! Wish I knew more about them and their business model, but I’m happy to be a student of this new chapter.

David Katz
BrainTrust

This is an acquisition that would have been unthinkable even a few years ago: a clothing rental service buying a two-century-old department store.

Le Tote even claims to have a plan to fix the legacy department store model, open more doors, and create “hubs” for subscribers.

“‘The idea is to take advantage of the store locations to give our customers a way to shop online and offline,’ Le Tote CEO Rakesh Tondon said to Business of Fashion. ‘The goal is to learn from these stores in the next six to 12 months and roll out more stores in the country — taking this regional chain to be a national chain.'”

The irony goes further. HBC sold the Lord & Taylor iconic and flagship store on Manhattan’s Fifth Avenue to WeWork. WeWork is rumored to be in negotiations for Amazon.com to lease the entire building.

David Weinand
BrainTrust

What an ending for a storied brand. While a DNVB like Le Tote can bring some expertise around personalization and curation, where will the operational expertise come from? I see the only path for them as being to convert the chain to smaller format stores.

Georganne Bender
BrainTrust

Yesterday I tweeted, “Meanwhile, while everyone is worrying whether or not established retailers should or should not add subscription services, a subscription service bought Lord & Taylor. The times they are a-changing.“

Lord & Taylor has long been one of my favorite stores, but lately the once fine store near me is tired: fitting rooms are trashed, the famous shoe department has been downsized, apparel assortments are weak, bright yellow and black signs are showing up all over the sales floor, and the cashier desks have been replaced by – shiver – a queue line. None of these things are representative of this once great retailer. I hope that Le Tote can breathe some new life into Lord & Taylor without destroying its legacy, but I have my doubts.

Dave Bruno
BrainTrust

I don’t see this ending well at all. Le Tote ‘s business model will not scale to 120,000 square foot department stores, and they are acquiring only tarnished brand equity and overhead to help them survive while they attempt to learn how to run a chain of huge department stores.

Dick Seesel
BrainTrust

I agree with most of my fellow panelists that this will be a challenge for Le Tote. The “rental fashion” business may have legs, but the space is starting to get overcrowded despite the growing value of data science. Plus, a department store with multiple locations presents totally different kinds of operating challenges in today’s struggling mall environment.

Add to these concerns the long-term decline of L&T’s brand equity, and it seems like a questionable match to me. HBC may have felt that this was the best it could do, like a baseball team trying to dump salary at the trade deadline.

Michael Decker
BrainTrust
Michael Decker
Vice President, Marketing Strategy
16 days 22 hours ago

The low price and easy terms Le Tote got for L&T made it a no-brainer for the former. Le Tote will do well with renting the high ticket dresses and will make inroads into that market (against Rent The Runway). Lord & Taylor may well reinvent itself as a 20,000 square foot retailer dedicated to digital personalization. Look for lots of testing with BOPIS and L&T-branded subscriptions offered to the new customer base that hasn’t considered that model before. Interesting, low-risk acquisition for Le Tote.

Bob Phibbs
BrainTrust

Sorry, I don’t get it. Retailers already have trouble predicting trends and making shopping convenient. Having a collection of one-offs is at odds with convenient and frictionless – you don’t need a store for what the app can do. And with every department store offering rental, it’s just another race to the bottom of unprofitability.

Shikha Jain
BrainTrust
What a bold move! There are so many interesting trends happening here. A rental service going into a high-end department store tells us they need the physical brick-and-mortar presence and that maybe consumers are not ready for 100 percent e-commerce businesses. The lackluster performance of L&T shows that the large store formats are on the decline and newer generations browse and shop very differently. A rental subscription business making such a bit bet indicates that they believe either majority of consumers still buy vs. rent or that the rental market is going to take off much faster than expected. In terms of thinking through the merger there are a lot of considerations. How much overlap, if any, does Le Tote expect in the consumer base? I’d imagine very little since L&T is typically more sophisticated vs. Le Tote which seems to be be aimed at a young professional audience. How will the technology for curation be used in-store and has Le Tote tested this? What will be the different business models used? Will it be… Read more »
Cynthia Holcomb
BrainTrust

What are Le Tote’s “advanced personalization techniques?” How will these techniques suddenly lift Lord & Taylor from the abyss? The reason for purchase according to Le Tote CEO Rakesh Tondon is, “Le Tote will be merging the iconic Lord & Taylor brand with technology.” Le Tote’s means to execute this sale? Low-interest rates on the back of debt financing. Sound familiar?

A review of Glassdoor and Yelp customer and employee reviews paints a challenging environment. The technology used to personalize a physical world customer experience must first have a great physical world to leverage. To transition 45 Lord & Taylor stores into hotbeds of “advanced personalization techniques” will take time. Requiring large-scale clearance of current goods, killer in-store (vs. online) merchandising strategies and product assortments, all requiring time, talent and resources.

In the end, based on Le Tote’s online apparel rental brands, the new Lord & Taylor will be filled with brands already found at other retailers, struggling to survive, including the now “sold” Lord & Taylor.

Rich Kizer
BrainTrust

“Beginning in 2021, HBC can reassess the use of Lord & Taylor locations and recapture certain stores to determine their best use.” What? And after that, “The customers have spoken, and people are looking for smaller, more personalized locations — that’s something we do well at Le Tote.” What a deal.

Steve Dennis
BrainTrust

It turns out, as we should know by now, that combining a mediocre brand with a lousy one rarely creates something remarkable. This feels like it could be Sears/Kmart 2.0. Or is it 3.0?

Stephen Rector
Guest

With this purchase, is Le Tote trying to play catch up to Stitchfix and Rent the Runway, two digital retail darlings? Or are they trying to compete with Macy’s and Nordstrom and becoming the next-generation department store? Unfortunately, I don’t believe the purchase of Lord & Taylor will make a difference on either possible strategy. Best of luck to them!

Craig Sundstrom
Guest

Many will note the selling price of $100M, and compare it to the (former) 5th Ave Flagship’s price of $850M, and draw their own conclusions about where the value in L&T lies.

Certainly, this is a wild pitch out of left field — my apologies for the mixed metaphors — so it’s hard to evaluate under traditional metrics. Much like the tie-up with Walmart — crazy enough to work or just crazy?

I think I will forever wonder (and if this doesn’t work out, regret) that HBC didn’t simply merge the name with Saks, i.e. Saks, Lord & Taylor, but that’s past. I wish them well in the future.

Ananda Chakravarty
BrainTrust
The personalization factor here is in the ecommerce side. These advanced personalization techniques are tied to the nature of Le Tote’s filled out customer profiles. Other than expanding assortment brands to use in its own model, there are only a few advantages for the in-store experience — returns and fitting showrooms for Le Tote. This is not a brand revitalization play, but an expansion play for Le Tote to thrive. Rental has met with mixed success and this will give a store presence with some advantages in managing their costs. For HBC, they still will influence the L&T brand with 2 board seats and some equity. L&T may take a shot at personalization in the store, but the merger is not designed to increase in-store sales. $100mm for a $1.1B sales company is basically a fire sale price, so this seems more of a white knight funding play including taking over $174mm (3 years of $58mm expenses) in rental obligations off the books rather than a real takeover. The real rental models will start at… Read more »
Cate Trotter
BrainTrust

This is a fascinating development for sure. It’s a real change for Le Tote and I wonder if they’re up to the challenge. Running a physical retail business like Lord & Taylor is not to be taken lightly. Although it suggests they will keep all the spaces open, I wonder if in practice we’ll see some changes as they adjust. It is interesting though to see the continuing trend of digital companies moving into physical space.

The rental element is also an interesting one. It’s a small, but growing, area. I can see opportunity for Le Tote to use Lord & Taylor’s spaces as physical connection points with customers — whether that’s letting them return items or creating real-life versions of totes for them to try on. Whether that’s enough to make this combination work, I’m not sure.

wpDiscuz
Braintrust
"Lord & Taylor may well reinvent itself as a 20,000 square foot retailer dedicated to digital personalization."
"Having a collection of one-offs is at odds with convenient and frictionless – you don’t need a store for what the app can do."
"Le Tote’s means to execute this sale? Low-interest rates on the back of debt financing. Sound familiar?"

Take Our Instant Poll

What’s the likelihood that Le Tote will help revitalize Lord & Taylor?

View Results

Loading ... Loading ...