When Helena Foulkes arrived at the helm of Hudson’s Bay Co. in early 2018, she was shocked at the poor state of its operating systems.
HBC’s technology was so unreliable that during Black Friday sales day in 2017, the Hudson’s Bay e-commerce site crashed for two hours and faltered at other times. Cash registers at the company’s U.S. Lord & Taylor stores were down sporadically throughout the day. Ms. Foulkes, who took over as chief executive of parent HBC three months later, estimated the retailer lost $5-million in sales on that day alone.
“In many ways, we were building bright, shiny objects, while the foundation was not in place,” Ms. Foulkes said in an interview in a usually unoccupied office at HBC in Toronto. She spends most of her time at HBC’s New York offices, from where its Saks Fifth Avenue, Saks OFF 5th and Lord & Taylor chains are run.
“We’ve not been performing well. We’ve spent a tremendous amount of cash. We’ve had erratic bottom line performance ... We’re working very hard and fast to shed the things that don’t matter and really focus on fixing these fundamentals.”
After five years of acquiring bright, shiny objects – Saks, the European retailer Galeria Kaufhof and the Gilt.com flash-sale site – HBC under Ms. Foulkes is unravelling its complex structure, selling divisions, closing stores and getting back to basics.
Now, rather than making big, bold bets, Ms. Foulkes is testing smaller initiatives in a “fail fast, fail cheap” approach to turning around HBC’s sagging performance and stock price. And she is looking for new uses for weak stores, such as leasing more of its space or shuttering more outlets. Her tests are aimed at responding to customer service “pain points.”
When she arrived, she was shocked to learn HBC didn’t do a daily scorecard of customers' experiences, to measure whether they would recommend a store to friends and family.
By September, these net promoter scores (NPS) found that Hudson’s Bay ranked the worst of all HBC-owned chains. She got an earful, most notably complaints about not enough sales help in women’s wear, one of its most important departments. So her team shifted labour to that area from a number of others.
In the shoe department, customers complained staff took too long to fetch items from the backroom, she said. “Sitting there waiting for someone to schlep back and bring three boxes, then to find the one you like we don’t have in this size, is frustrating.” Now she’s testing putting all the boxes out in self-serve mode, similar to the practice of discount stores.
She put a new focus on returns of e-commerce purchases after discovering that one-third of customers who return their online orders to stores make purchases of $100 or more once there. But Hudson’s Bay customers often don’t know where to return merchandise in the store, she said. “They were wandering through the stores trying to figure out how to return, ‘Where do I go?’” So she is testing counters for digital returns and order pickups. She sees an opportunity because 97 per cent of Hudson’s Bay returns of digital orders are taken to stores compared with closer to 10 per cent at U.S. retailers, she said.
Another pain point is that shoppers can’t find staff to check them out, which is why she is rolling out more prominent central checkouts.
But nothing at HBC was as broken as its digital operation, she said. The retailer’s tech team was too spread out, with little accountability. A Saks leader, for instance, “had to go find five people in different parts of the organization to get them together to make a change. And guess what? We live in a digital, fast world and that wasn’t fast enough.” Among her new executive hires was a senior tech guru from CVS, the U.S. drugstore retailer where previously she was a top executive. HBC’s new IT leader has ditched consultants in favour of hiring 200 new IT employees in Canada, half of whom are already in place.
Another problem: During the last holiday season, HBC’s five call centres responded to just 35 per cent of calls within 30 seconds. This year, that response rate has jumped to 95 per cent, she said.
HBC’s marketing team is finding savings. For example, HBC’s automated systems previously advertised to online shoppers 25 times after they looked at an item on one of its sites. It now tracks them only twice with the same sales results and “radically” reduced spending, she said. It also makes customers feel “less annoyed by us."
Patricia Baker, retail analyst at Bank of Nova Scotia, said early signs of Ms. Foulkes’s efforts are encouraging, although she has a lot more work to do.
“Her approach is very methodical and no nonsense," Ms. Baker said. “I think that’s what the business needs … The time for big, bold moves is behind them.”
Under Ms. Foulkes’s watch, HBC sold off half of its Germany-based Galeria Kaufhof division, divested Gilt and is closing underperforming Lord & Taylor stores. By early next year, it is set to sell that chain’s New York flagship store to WeWork for US$850-million. Saks is performing strongly and overall HBC gross profit margins are improving.
Richard Baker, HBC’s executive chairman and the New York real estate investor who controls the retailer, said its board was looking for a CEO who was a “true operator” and “willing to make the tough decisions for the business.”
HBC needs a lift. Its third-quarter loss from continuing operations grew to $124-million from a loss of $116-million a year earlier. Sales rose 5.6 per cent to $2.19-billion. Its stock price has been sliced by more than half since HBC returned to the public market in late 2012 at $17.
Activist investor Jonathan Litt, whose firm is believed to own about 3 per cent of HBC, recently renewed his call for a bigger sell-off of the troubled retailer’s properties. Ms. Foulkes agreed with him that HBC’s stock is undervalued but added that the divestitures are consistent with what Mr. Litt is seeking. “I’m really open to anything that will drive shareholder value,” she said.