Hudson’s Bay Company to sell Lord + Taylor for US$100m

Hudson’s Bay Company (HBC) has announced plans to sell its US department store chain Lord + Taylor to Le Tote, a clothing subscription and rental business, for US$100 million ($149 million).

The decision, announced Wednesday, August 28, will enable the Canadian retail company to focus on its other department store businesses: Saks Fifth Avenue and Hudson’s Bay.

HBC, which also owns German department store chain Galeria Kaufhof, called these its “greatest opportunities” in a statement to investors.

“We’re excited to have reached an agreement with Le Tote that creates a new model for Lord + Taylor, bringing together fashion rental subscriptions with traditional retail,” Helena Foulkes, HBC’s CEO, said in a statement.

“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.”

Founded in 2012, Le Tote is a subscription company that lets users rent a certain number of clothes and accessories for a flat fee every month.

It operates a similar model as Trunk Club, which Nordstrom acquired in 2014 for an estimated US$350 million, according to media reports at the time.

Le Tote’s acquisition of Lord + Taylor demonstrates how much the power dynamic between traditional retailers e-commerce disruptors has shifted in the past five years.

Under the terms of the agreement, Le Tote will acquire the Lord + Brand brand and related IP, and assume operations of its 38 stores, digital channels and associated inventory.

Rakesh Tondon, Le Tote’s founder and CEO, said the company will establish drop-off points for its apparel rental business in Lord + Taylor stores, and use its technology to improve product recommendations and personalised shopping experiences, Reuters reported.

“We want to keep the Lord & Taylor brand (and) energize it, (but) not change too much too quickly,” Tondon said.

Le Tote said it expects to extend employment offers to the vast majority of Lord + Taylor’s associates.

Under the terms of the agreement, HBC will receive US$75 million in cash upon the transaction’s closing, which is expected to occur before the start of the 2019 holiday season, and US$25 million in cash after two years.

In addition it will receive an equity stake in Le Tote, two seats on the company’s board and certain rights as a minority shareholder.

HBC, through its real estate joint venture, will retain ownership of all owned and ground-leased real estate assets related to Lord + Taylor, and will maintain economic responsibility for the rent payments owed by Lord + Taylor for at least the first three years.

The company expects to be liable for approximately C$77 million in Lord + Taylor total cash rent on an annual basis.

Starting in 2021, HBC and Le Tote will have options to reassess Lord + Taylor’s store network. This may include HBC recapturing select locations for the possibility of redevelopment into mixed-use properties with a variety of services, experiences and retail offerings.

Lord + Taylor represented C$1.4 billion, or roughly 14 per cent, of HBC’s total retail sales in FY18, the company ended up booking a C$119 million loss attributable to the department store chain.

Le Tote, a private company, was most recently valued at US$180 million, according to Forbes, having raised over US$60 million in funding, according to TechCrunch.

The company is in the process of securing financing for the purchase price.

This story first appeared on our sister site Inside Retail Australia.

You have 7 articles remaining. Unlock 15 free articles a month, it’s free.