- Angela Gonzalez-Rodriguez |
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 shareholding
"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