New York – Hudson’s
Bay Company (HBAYF) has announced it has sold Lord & Taylor brand to Le
Tote, Inc., a fashion rental subscription service, for 75 million dollars.
The deal, originally expected to close at 100 million, signals a new era
for the oldest US department store chain.
“Since founding Le Tote, it’s been our mission to push the boundaries of
retail,” said Le Tote CEO and founder Rakesh Tondon in a joint statement.
“We’re excited to bring Le Tote together with Lord & Taylor, a storied
brand that has stood for quality, style and service for nearly two
centuries. With this acquisition, we continue our journey in creating the
future of retail.”
In an interview with CNBC, Tondon explained how they’re planning to take
advantage of the historically low-interest rates in the US. He further
explained that Le Tote considered opening its own stores, but the
opportunity to achieve scale quickly by acquiring an established brand like
Lord & Taylor was more attractive. “What we’re trying to do is merge
tradition with technology,” he said.
Le Tote subscribers had been asking for “pop-up locations, for stores where
they could come, touch, feel” products before making “a decision to
purchase potentially online,” Tondon said. “We’re going where the customers
are asking us to go.”
Le Tote to revamp Lord & Taylor’s website
Le Tote has promised the department store’s customers more brands, new
options to consume and “massive changes” to the website, reports Bloomberg. “We
want to keep the Lord & Taylor brand (and) energize it, (but) not change
too much too quickly,” Tondon said.
On this note, Lauren Freedman, Internet Retailer’s senior consumer insights
analyst, points out that the retailer has significant work to do to bring
LordandTaylor.com up to par, starting with its omnichannel services: “Buy
online pick up in store [BOPIS] is available but there are many
limitations, likely related to Lord & Taylor’s recent store closures,” she
says, noting that shoppers can’t place a BOPIS order on the retailer’s
mobile site. “That’s a big miss.”
Furthermore, Freedman considers that Lord & Taylor’s shipping offers are
uncompetitive with those of peers including Macy’s and Nordstrom.
Hudson Bay’s take: re-focus on upscale market and a seat at Le Tote’s
“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 Hudson Bay CEO
Helena Foulkes in a joint statement.
HBAYF – which also owns Saks Fifth Avenue- will get an equity position in
Le Tote as part of the deal, in addition to a secured promissory note for
25 million dollars payable in cash after two years the cash payment.
Hudson’s Bay will also receive an equity stake in Le Tote, two seats on the
company’s board of directors and certain rights as a minority shareholder.
Additionally, Hudson’s Bay Company will continue to own the real estate and
leases associated with the remaining 38 Lord & Taylor stores.
The former owner of the department store chain has agreed to pay 58 million
dollars in annual rent on the Lord & Taylor stores that are leased for “at
least” the next three years, reports CNN Business. Over that period, Le
Tote expects to keep the stores open and will continue to employ most of
Lord & Taylor’s staff. But starting in 2021, the two companies will have
the option to “reassess” the store network, allowing Hudson’s Bay to find
other uses for the properties, as transcended from the deal.
Former Hudson’s Bay CEO, Storch told Fox Business that “Lord and Taylor,
the department store as a whole, as a category, has been struggling vitally
in this environment.” Latest publicly available records show that Lord &
Taylor recorded about 1.1 billion dollars in sales last year. However,
Hudson’s Bay has lost money over the past three years, disclosing last May
it was considering a sale of Lord & Taylor.
Considered by many in the trade as a ‘junior department store’ (those
lacking the Home category, which has performed more strongly than the
apparel section), Storch highlights that “Lord and Taylor is an extreme
case of a department store disease because it’s what people used to a call
junior department store since it doesn’t have a home department.”
Meanwhile, the sale allows Hudson’s Bay to focus on its luxury brands in
addition to its Canadian expansion. “Hudson’s Bay in Canada is a dominant
player in the Canadian market,” said Storch.
Photo credits: Tdorante10, Shinya Suzuki, Flickr