Sears gone, Hudson?s Bay selling flagship stores as major retailers blindsided by changing shopping environment
Glen Korstrom
Western Investor
Sears Canada plans to close all its stores and liquidate its assets in the lead-up to the holiday season. Hudson’s Bay Co. (HBC) is selling its flagship New York and Vancouver stores.
The sales are in reaction to dramatic changes in the shopping environment that have retail watchers musing about the future of department stores.
No one expects business at department stores to suddenly collapse, but retail analysts and pollsters say competition is getting fiercer and department stores that do not operate efficiently or embark on wrong-headed strategies will feel the pain.
“Holt Renfrew, for many years, has been an operation in disarray,” DIG360 principal and retail analyst David Gray told attendees at the October 12 Retail West 2017 convention.
A potential problem is that the company is going out on a limb in its bid to go even more upscale than it has been.
Going higher-end means that fewer shoppers will be able to afford the chain’s products, and those who do will be part of an international jet set that is accustomed to shopping at stores such as Selfridges & Co. in London, England.
Such “high-end luxury” stores set the bar high among well-heeled shoppers, Gray said.
“Then they come back to Canada and go to Holt’s. Holt Renfrew is going to have a perception problem.”
Holt Renfrew has these challenges while being affected by a separate industry-wide problem.
Brands are increasingly opening kiosks within department stores to introduce their products to new markets. Employees at those kiosks then collect lists of customers who were originally shoppers at the department store. The brand then leaves the department store to flourish on its own with the help of that customer information.
Saint Laurent, for example, introduced its brand to Metro Vancouverites with a kiosk in Holt Renfrew. It then left last year to open its own boutique in downtown Vancouver.
“Saint Laurent is one of the world’s most popular brands right now,” said Retail Insider Media owner and retail analyst Craig Patterson. “The brand essentially says, ‘Thanks for all your help. We’re ready to go on our own. We’re grown up now.’ They open a boutique and the department store loses the brand completely.”
Patterson does not think Holt Renfrew is in operational disarray.
He also understands the store’s ambitious renovations at its Vancouver store.
He has heard that the Vancouver store’s expansion is in anticipation of it becoming the top-selling luxury department store in North America outside of Manhattan – potentially with sales as high as $500 million annually, though sales haven’t yet achieved such a level, despite being the top performer in the Holt chain.
“A lot of Nordstrom shoppers are also coming from the [Hudson’s] Bay [Co.],” said Christian Bourque, who operates Leger Marketing’s Montreal office.
Bourque pointed to data from a recent survey that Leger carried out with DIG360 showing that of those customers who are spending more on fashion today compared with two years ago, 30 per cent shop at a high-end store. However, a much higher percentage shop at mid- to low-end department stores, he said.
“If there is potential, it would seem to lean in the direction of mid- to high-end department stores as opposed to mid- to low-end department stores.”
Hudson’s Bay Co. is reacting to the changing retail climate by liquidating its real estate.
Hudson’s Bay is inviting bids on its iconic Vancouver flagship store on Granville Street, following news of the retailer’s Lord & Taylor Fifth Avenue sale in New York.
The Toronto-based HBC is selling its New York store in a nearly $1.1 billion deal that would include leasing significant floor space to collaborative workspace company WeWork. WeWork also announced it would be leasing space at the Granville Street Hudson’s Bay store.
“This partnership places HBC at the forefront of dynamic trends reshaping the way current and future generations live, work and shop: the sharing economy and urban and suburban mixed-use real estate planning,” said Richard Baker, HBC’s governor, executive chairman and interim CEO, in a statement.
HBC has enlisted real estate advisers CBRE and Brookfield Financial Corp. to find a buyer for its Vancouver location.
The six-storey Granville Street store covers 650,000 square feet and has an assessed value of nearly $59.7 million.
However, the property is expected to sell for as much as $900 million.
HBC will continue to operate its downsized store through a lease-back arrangement, which could include retail space for Saks Fifth Avenue, which HBC owns.
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