The future of Lord & Taylor chain now hangs in the balance in the wake of layoffs that reduced its headcount to bare bones, sources said.
The department store chain, which Hudson’s Bay Co. sold to subscription rental platform Le Tote for $100 million last August, dismissed store associates, merchants and members of the executive team. CEO Ruth Hartman left last week, the same time when most of the employees were laid off, the source said.
Le Tote executives have not responded to a request for comment.
Another source said some staff might be put on furlough so they could be brought back to help with clearing out the inventory, both in stores and at its online operations. Le Tote went through its own rash of layoffs as well, the source added.
Like virtually all other apparel retailers, Lord & Taylor stores have momentarily been removed from the retail equation in compliance with anti-coronavirus mitigation measures mandated by state and local governments.
And though brick and mortar will inevitably re-open when the pandemic subsides, some question whether the consumer psyche would even consider buying new apparel and shoes when stores once again welcome shoppers. The belief is that many consumers, battle scarred both financially and emotionally, may just continue to shop their closets and pad their savings for the next rainy day. That’s a strong possibility given the sheer number and volume of layoffs and furloughs that have crippled industries from retailers to hospitality and restaurants, some of which have also closed as others have remained open for takeout or delivery only.
Even if decision-makers move to shut down Lord & Taylor for good, there’s little to be done at the moment without viable stores through which to clear out inventory.
And one finance expert also pointed to the likely need to close some stores permanently, noting that the current business no longer justifies either the existence of Lord & Taylor’s 38-store fleet or its rental obligations.
Under the terms of the Hudson’s Bay-Le Tote deal, the Canadian department store operator remains responsible for the roughly $58 million in annual rent payments at the Lord & Taylor locations operated by the direct-to-consumer subscription platform. The two had agreed to re-evaluate the store network in 2021.
Hudson’s Bay said previously that the Lord & Taylor business was about $1.05 billion in fiscal 2018. Le Tote acquired Lord & Taylor’s intellectual property assets, digital property and inventory, and agreed to assume the store operations, in a transaction valued at $100 million. The initial payment was set at $75 million in cash at the close of the deal, with a promissory note for $25 million that is payable in two years.
Rakesh Tondon, Le Tote’s CEO, co-founded the subscription rental platform with Brett Norhart in 2012. Digitally native firms like Le Tote have gradually migrated into the physical space to build out their customer bases, especially as online acquisition costs have escalated in recent years. The easiest way for companies to build out a store base–and scale up quickly–is to buy an existing retailer, as Le Tote did.
Tondon said at a conference last September that the initial plan was simply to partner with Hudson’s Bay to include a Le Tote shop within select Lord & Taylor doors to introduce the brand to a new group of customers who might otherwise not know about the rental model. Hartman said Le Tote had opened a showroom called “Rental Studio” at a Yonkers Lord & Taylor store in suburban New York. At that time, the company was considering opening additional rental studios and shop-in-shop concepts to foster the connection between Le Tote and the Lord & Taylor customer.