Bowing to pressure from an activist investor, Hudson’s Bay Company is reviewing its options, according to sources.
Throughout the summer, Land and Buildings, which owns about 5 percent the company’s stock, has harangued the Canadian retailer about the ways in which it has failed to monetize its key assets. Rather than focus on retail—which hasn’t been going well for Hudson’s Bay or most other department store lately—the firm, lead by chief investment officer Jonathan Litt, urged HBC to look at things from a different—more profitable—perspective.
Reuters reports HBC, which operates Saks Fifth Avenue and Lord & Taylor, is looking to hire a financial advisor to review all options, including taking the company private, exiting some retail businesses and offloading key real estate holdings. The market had a positive reaction to the news, which broke on Friday, rewarding the company with an increase in share price.
[Read about how Hudson’s Bay plans to turn around its retail business: Hudson’s Bay Company Restructuring to Include 2,000 Lost Jobs]
In the first of two public letters, the shareholder called on HBC to monetize or repurpose its real estate holdings—or consider taking the company private. Owing to the retailer’s $10 billion in property holdings, Litt called HBC “one of those rare diamonds in the rough,” saying the company’s true value is as a real estate play, not a retailer. To unlock that potential, Litt said the company should redevelop the $3 billion Saks New York flagship location into a boutique shopping center or transform the upper floors into condos—basically anything more profitable than its current use.
The subsequent communication called for HBC to sell its European and U.S. operations to focus on Canada, where it is most successful. It also put the retailer on notice that Land and Buildings was prepared to start a proxy war if HBC didn’t take action.
Land and Buildings also called into question the wisdom of HBC’s plan to invest $250 million in renovations for the Saks location and the retailer’s pursuit of not one but two mergers, first with Macy’s, then Neiman Marcus.
The department store’s actions—and Land and Buildings’ frustrations—follow a 40 percent loss in share value over the last 12 months and a fifth consecutive quarter of consolidated same store sales declines as it grapples with the same trifecta gripping the retail apparel industry as a whole: consumer malaise, e-commerce cannibalism and the discount dilemma.
In June, Hudson’s Bay announced it would restructure the business to become more agile, evolve its cost base and shore up its omnichannel capabilities, a transformation that called for 2,000 job cuts.