The storied Hudson's Bay Co. is headed for another makeover, although its flagship name is secure for now, after Canada's oldest company changed hands Wednesday for the second time in less than three years.
Richard Baker, a New York real estate magnate who is the company's new owner and 38th governor, says he is committed to the Bay name but wants to shake up Canadian retailing by importing his tony Lord & Taylor retail chain and stacking stores within large department stores.
Mr. Baker, who entered the retail trade only two years ago with the purchase of the venerable Lord & Taylor, said that he wants to put his American brand within the Bay's largest outlets.
He would even put HBC's discount Zellers and other retailers or offices in the same multifloor stores.
"We love great brands that have a little tarnish on them — that's what we're looking for," Mr. Baker said in an interview.
"I'm not interested in the perfect brand. If it's all perfect there's no value for me there."
Wednesday's deal to buy HBC will create an $8-billion (U.S.) merchandising powerhouse for the new buyer, based in Purchase, N.Y., by combining HBC's Bay, Zellers, Home Outfitters and Fields chains with Lord & Taylor and Fortunoff, a jewellery and home decor retailer.
Mr. Baker's NRDC Equity Partners, which already held 20 per cent of HBC, bought the rest of the retailer yesterday just three months after its previous U.S. owner, Jerry Zucker, died unexpectedly of brain cancer. He had snapped up HBC for $1.1-billion in early 2006 after a hostile takeover battle.
Mr. Baker said he paid an amount that valued the company at "a little" more than what Mr. Zucker had paid for it.
The concept of running the flagship Bay stores with an array of banners, including Lord & Taylor, is a novel one for a major Canadian department store retailer. But Mr. Baker is no stranger to bringing new ideas to tired brands.
In 2006, his company bought Lord & Taylor and quickly oversaw what many say is a turnaround of the 47-store chain. Mr. Baker shifted it more upscale and added new labels, such as Coach and Hugo Boss, after it had closed its weakest outlets. With the Bay, he will be challenged by the chain's long slide in Canada, and a general malaise for department stores. However, he also will assume the chain's sponsorship of the Canadian Olympic team, just as it prepares to arrive in Beijing in Bay-designed uniforms.
The idea of using the Bay stores for more than one banner is "brilliant," said retail consultant Jim Danahy, managing principal at CustomerLab. It taps into space in large Bay stores that is now underused, bolstering its overall productivity, he said.
"It's a master stroke to be very selective in how they use their stores."
Still, the new owner has his work cut out for him in an era when department stores are losing market share, said John Williams of retail consultancy J.C. Williams Group.
"I think it's a tough slog," Mr. Williams said. "There may be some real estate play in it. I don't think two stores that are underperforming will make one store that overperforms ... Unfortunately I don't think Canadians know Lord & Taylor and I don't think they know Fortunoff at all. It will take some time to build brand awareness."
Zellers, for its part, still has to compete head on with Wal-Mart Canada Corp., a discount juggernaut that is rapidly expanding in this country, he said.
HBC, founded in 1670 as a fur trading company, was struggling when Mr. Zucker acquired it and took it private. A South Carolina billionaire with almost no merchandising experience, he set out to renovate stores, shift the Bay more up market and remodel Zellers stores.
After his death in April, the fate of HBC was left in the hands of his wife, Anita, a retired teacher and philanthropist. Industry insiders thought it was only a matter of time before the company was sold.
Still, the Zucker family "was not initially inclined to sell," said Nicolas Muzin, Mr. Zucker's son-in-law and corporate counsel at the family's firm in South Carolina. NRDC approached the family with "a very generous offer and it just made sense," Mr. Muzin said in an e-mail.
The talks started after the death and an agreement was arrived at quickly, Mr. Baker said.
NRDC seemed like a logical buyer. It had tried unsuccessfully to purchase HBC when it was on the block, but was outbid by Mr. Zucker. Mr. Baker sits on HBC's board of directors, and is quickly expanding into retail.
At HBC, he plans to name — as early as today — a new CEO who is a seasoned retailer and who will replace Robert Johnston, a lieutenant of Mr. Zucker who arrived at HBC last August. Mr. Baker will also appoint separate CEOs for both the Bay and Zellers, creating new positions.
Mr. Baker said he could envision a big Bay store with a Zellers in the basement, Lord & Taylor and the Bay upstairs and a Fortunoff store, or offices at the top.
Lord & Taylor will serve to fill a gap in the Canadian retail landscape between the Bay and the carriage trade Holt Renfrew, Mr. Baker said.
He wants to put greater focus on branded apparel at discounter Zellers, he said. He plans to improve its customer service and, in the future, roll out new 125,000-square-foot prototype stores.
He will also bring Fortunoff to Canada, both as standalone stores and within the Bay. And he wants to expand NRDC's Creative Design Studios, selling its branded collections throughout North America and internationally. Its brands include Peter Som's eponymous collection.
