Hudson’s Bay Looking at Closing Half Its Stores Amid Restructuring: Source

The restructuring process at Hudson’s Bay, which kicked off recently, will likely see a significant transformation of Canada’s oldest company as it endeavors to remain viable.

A source familiar with the matter has revealed that the department store company is considering closing approximately 40 of its 80 stores. However, this number could change as discussions progress.

The precise number of store closures will be determined through creditor protection proceedings in the Ontario Superior Court of Justice over the coming weeks. These proceedings are aimed at allowing Hudson’s Bay to restructure and streamline operations with the goal of staying in business, rather than opting for bankruptcy, which would lead to a complete shutdown.

This process has been employed by several retailers in recent years—including Mastermind Toys, The Body Shop Canada, Ricki’s, and Cleo—allowing them to continue operations, albeit under new ownership, after closing some stores during their restructuring.

According to Dina Kovacevic, editor of the Insolvency Insider newsletter, it is common for retailers under creditor protection to close less profitable stores as a straightforward method to stabilize operations.

“It’s not that the company will cease to exist, but it will likely downsize and some stores will likely be closed,” explained Kovacevic. “There may be some liquidation sales, and the company will realign around some stronger performing locations.”

This downsizing allows Hudson’s Bay to leverage its most valuable asset: its real estate. Most of its stores are strategically located in prominent shopping areas, making them attractive to potential buyers, though the large size of these spaces presents challenges for landlords seeking new tenants.

If Hudson’s Bay scales back its footprint, shoppers are expected to see liquidation sales, where everything from merchandise to store furniture may be sold off, as noted by Liza Amlani, co-founder of the Retail Strategy Group.

However, closing stores alone won’t necessarily ensure the survival of the company. For Hudson’s Bay to not only survive but also thrive, its executives will need to embrace innovative strategies, suggests Jenna Jacobson, an associate professor specializing in retail.

“It’s not just about cutting costs, it’s really about revisioning what a strategic plan could be to adapt to the challenges that are present in this evolving retail landscape,” Jacobson emphasized.

Amlani also emphasized the need for a commitment to retail fundamentals, advising that executives should “shop their own business” to gain insight into the customer experience and quickly identify improvement areas.

Over recent years, retail analysts have observed declining foot traffic at Hudson’s Bay locations, with consumers increasingly spending online or at retailers offering more engaging in-store experiences.

The company cited subdued consumer spending, trade tensions between the U.S. and Canada, and post-pandemic declines in downtown store traffic as significant challenges in its filing for creditor protection.

Furthermore, the company’s financial struggles became evident when Jennifer Bewley, the chief financial officer, reported difficulties in making payments to landlords, service providers, and vendors, further exacerbated by landlord tensions leading to incidents such as store lockouts and merchandise seizures.

The situation has become precarious, with the company approaching a point where it may fail to meet payroll obligations for its 9,364 employees unless additional funding is secured.

According to Kovacevic, Hudson’s Bay’s struggles mirror those of many retailers grappling with challenges related to traffic and sales post-COVID-19, along with trade tensions between Canada and the U.S.

“I think maybe [the trade tensions were] just the final nail in the coffin,” she stated. “But I think HBC was likely heading in this direction anyways.”

As the restructuring unfolds, all eyes are on Hudson’s Bay to see how Canada’s iconic retailer will navigate these troubled waters, and what steps it will take to secure its future.