Hudson’s Bay Company

Sector: Department stores Countries of operation: Canada and the US Key product categories: Apparel, beauty, grocery and home-improvement products Annual Metrics [caption id="attachment_131533" align="aligncenter" width="700"] After going private in 2020, the company no longer discloses its earnings.
Fiscal year ends on January 31 of the same calendar year.[/caption]   Summary Founded in 1670 and headquartered in Brampton, Ontario, Hudson’s Bay Company is a holding company that owns and operates department stores in Canada and the US. Its portfolio includes luxury stores, premium department stores and off-price fashion shopping destinations. The company owns three decentralized retail divisions that operate autonomously: Hudson’s Bay, Saks Fifth Avenue and Saks OFF 5TH. Furthermore, the company has significant investments in real-estate joint ventures: Hudson’s Bay owns properties in the US in partnership with Simon Property Group and in Canada through collaboration with RioCan Real Estate Investment Trust. On March 3, 2020, Hudson’s Bay completed its privatization transaction. As part of its privatization, Hudson’s Bay also announced management changes: former CEO Helena Foulkes stepped down effective March 13, 2020. Richard Baker, who was serving as Governor and Executive Chairman, became CEO while retaining his previous responsibilities. At present, Hudson’s Bay operates more than 250 stores, with about 30,000 employees around the world. Company Analysis Coresight Research insight: Hudson’s Bay has been struggling for the past few years, shutting down or selling some of its brands, such as Home Outfitters and Lord & Taylor. The company’s underperformance can be attributed to intense competition from apparel and beauty specialist retailers and online e-commerce companies—its online infrastructure is not as strong as other retail giants. Furthermore, the coronavirus crisis caused the shuttering of stores and substantial losses for the company, accelerating pressures on its underperformance. Even as stores reopened, the company’s future remains uncertain as it navigates privatization and a still challenging retail environment. As consumers continue to trade down to retail formats that emphasize value amid economic uncertainty, Hudson’s Bay may be looking to spruce up its off-price/non-luxury businesses. In February 2020, the company appointed a President to lead its off-price business, Saks OFF 5TH, for the first time in its history. Until then, Saks OFF 5TH was led by the President of the main Saks Fifth Avenue chain. We see this new appointment as a positive move by Hudson’s Bay, uplifting its off-price business. Hudson’s Bay has a strong brand name, customer recognition and survived several past crises, including the Spanish Flu and both World Wars—however, adapating to the coronavirus crisis is still going to be an uphill battle for the company. To weather the storm, Hudson’s Bay needs to resurface as a different company—we believe it should right-size and renovate its stores, as well as ensuring real integration between its physical and its online retail presence. This would expand on recent initiatives including the introduction of digital assistants, new payment options and omnichannel offerings. The company could also use some of the proceeds from shrinking its physical stores to continue to boost its online presence.

Tailwinds	Headwinds
Opportunities to grow online sales substantially from a small base Opportunities to drive private-label growth penetration A new management team with new ideas can overhaul the business	Pandemic-driven shift in consumer spending from discretionary to non-discretionary items Increased competition from specialists and online retailers

  Strategy In March 2020, Hudson’s Bay introduced strategic rebranding plans amid its privatization. The company’s strategy centers on the following three focus areas: 1. Elevate merchandise assortment

• Build assortments based on consumer demand in local markets.
• Use its dominant reach and full assortment to ensure that product offerings per store mirror customer demand in their respective markets.
• Boost its “go-forward” portfolio, which includes distinct segments. Its top priorities are in luxury, which drives over half of the company’s overall sales.
• Make focused investments to drive growth at Saks and Hudson’s Bay banners.

2. Enhance the customer experience across all channels

• Invest in e-commerce and digital.
• Shift marketing focus to increased digital.
• Adjust service model.
• Use customer feedback and data to make informed decisions.
• Speed up checkout at stores by creating in-store designated spaces for collection/returns of online orders.

3. Fix the fundamentals

• Reduce operating costs and boost margins.
• Reduce total debt.
• Capitalize on the value of its real estate.

Company Developments

Date	Development
February 2, 2021	Hudson’s Bay launches an online marketplace as part of its digital strategic evolution.
January 21, 2021	Hudson’s Bay begins meeting with investors to take Saks.com public within the next 12 months, splitting Saks.com from Saks brick-and-mortar stores.
November 20, 2020	Hudson’s Bay announces that it has earned five awards at the Canadian Marketing Association (CMA) virtual awards ceremony.
October 26, 2020	Hudson’s Bay launches new customer services for the holiday shopping season. These include an app, a “buy now, pay later” payment option, curbside pickup service, holiday rewards scheme, and live chat function with a sales associate.
October 19, 2020	Hudson’s Bay unveils HBC Properties and Investments (HBCPI), a dedicated real-estate and investment business to manage the company’s portfolio of assets. The company owns or controls 40 million square feet of gross leasable area across North America, either entirely or with joint venture partners.
October 1, 2020	Hudson’s Bay announces a new partnership with the Canadian designer platform INLAND to offer consumers emerging Canadian brands in apparel and accessories through TheBay.com from October 2 to December 31 this year.
September 2, 2020	Saks Fifth Avenue files a lawsuit against Bal Harbour Shops for disclosing confidential information related to its lease agreement and making defamatory public statements to the media, which omitted facts related to the dispute.
August 27, 2020	Hudson’s Bay relaunches its customer rewards program to ensure a frictionless, omnichannel experience from beginning to end. The program goes live across Canada on September 1.
August 13, 2020	Hudson’s Bay appoints Michael Culhane as Chief Financial Officer.
March 3, 2020	Hudson’s Bay completes its privatization transaction. CEO Helena Foulkes steps down and Richard Baker takes on the the CEO role.
February 10, 2020	Hudson’s Bay announces the appointment of Paige Thomas as President of its off-price business, Saks OFF 5TH. Previously, she served as EVP and General Merchandise Manager of Nordstrom’s men’s and kids’ departments.
December 3, 2019	Hudson’s Bay forays into the beauty space with the launch of its first private-label skin and makeup collection, Les Essentiels.

  Management Team

• Richard Baker— Executive Chairman and CEO
• Michael Culhane—CFO
• Stephen Gold—Chief Technology Officer and Chief Process Improvement Officer

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Source: Company reports