Nigel Dickson
The holiday season is a crucial one for most retail executives, but for Hudson's Bay Co. CEO Jeff Sherman, the stakes are especially high this year. The veteran U.S. merchant has spent the past 16 months revamping Canada's oldest company, even as the economy collapsed. This fall, the Bay introduced new high-profile brands, a line of Olympic clothing and a $5-million relaunch of The Room at its Toronto flagship, where dresses cost up to $21,000. Marina Strauss caught up with Sherman just as his vision is about to face the ultimate test: Canadian shoppers.
What's the consumer mood going into the holiday season? The customer still remains relatively cautious, still concerned about unemployment and the economy. Up until a couple of months ago, people were continuing to spend less, month after month. That has stopped. I don't think we'll be back to pre-recession spending for a while-for years. For the Bay, the opportunity is really attracting customers who have defected from us and are now coming back. So we're stealing market share. I think we are getting it from specialty stores. We're clearly getting it from Sears. With The Room, we will have some impact on Holt Renfrew.
How does The Room play into your broader strategy? The Room is intended to resurrect something that had always been a signature of the Bay. It's intended to create a whole attitude and a halo effect about the business. We are not abandoning the bottom end of the business. In order to attract some of the major national and international brands, you need to put them into an environment that they find conducive to their own brand image.
In shifting more upscale, your sister U.S. chain, Lord & Taylor, dropped some brands, such as Tommy Hilfiger and Calvin Klein. Recently it started restocking them. What have you learned from that? In the desire to transition the store to something different, they took away what the core customer expected from them. The customers left the business and went where those brands were sold. I think we lost a fair amount of business to Macy's, as those were the brands that they continuted to carry. When we brought those brands back into Lord & Taylor, the customers said, "I'd rather shop at Lord & Taylor than anywhere else." It's a lesson that applies to the Bay. We knew there was a customer for The Room when the Bay did it well. That customer went elsewhere. That's a very important customer to us-not the only important customer-and we're giving them a reason to come back. Lord & Taylor took away from the bottom and added to the top. What we're doing at the Bay is keeping the bottom while stretching toward the top.
What did you learn from your years at Polo Ralph Lauren? In many of their flagship stores, they have a mahogany staircase in the centre of the store. It almost looks like you're walking into someone's home, with fireplaces inside. It's intended to create not necessarily a store to shop in but an environment to shop in. There is a difference. The problem with the Bay is that it didn't move with the customer. It stayed stagnant. It hasn't put a lot of capital into its stores.
Will the British cheap-chic chain Top Shop put boutiques in Bay stores? We're talking to them but we have not struck a deal. I'd like to. That's an indication of how we're thinking of using a lot of the space in our stores. We're going to start taking a look at food and restaurants and entertainment venues. We've been talking to GoodLife Fitness. We're trying to make that happen.
What is the Bay's Olympic strategy now? We decided to use the handle of the Olympics to reintroduce and reconnect to the Bay's historical roots. That was a missed opportunity of the previous management. They almost moved away from the rich history and the connection that customers had to the Bay. The product is selling extraordinarily well. The standout, for sure, has been the red Olympic mittens. Canada and red are synonymous.
It's been a tough year. How will you measure success this holiday season? Business will be better than it was last holiday. On average, the business ended up about flat. We will be able to grow our business and achieve positive sales this Christmas, in the low single digits. I don't think they'll jump to anything in the stratosphere. I would call low single digits a victory at this time.