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How HBC’s CEO Is Trying Win Canadians Back to Hudson’s Bay

October 29, 2019, 10:24 PM UTC

Hudson’s Bay Co., the 350-year old Canadian department store chain, has fallen out of favor with many of the country’s consumers in recent years. But Helena Foulkes, the CEO of its parent company HBC, is working to restore the chain’s luster.

Foulkes is banking on Canadians’ attachment to the Hudson’s Bay brand to keep it going. “We’re the only major department store in Canada,” she said, speaking Wednesday at the WWD Apparel + Retail CEO Summit in New York City. Of course, it will take more than sentimentality to turn things around.

Hudson’s Bay, whose parent company HBC also owns Saks Fifth Avenue, is roughly on par with Macy’s in terms of assortment and prices. And like Macy’s and other U.S. department store chains, it has fallen into the discounting trap. What’s more, much of what Hudson’s Bay’s stores sell have come to be seen as blah and the same old, same old.

That has hurt HBC’s numbers. During the first two quarters of the current fiscal year, comparable sales fell 4.3% an 3.4% respectively at the chain.

Ironically, it was the loss of competition at more than half of the malls where Hudson’s Bay has a store that was a big culprit in the chain’s downturn. After the Sears bankruptcy and liquidation in Canada in 2017, Hudson’s Bay went after the Sears customers at the 53 malls where both chains used to have a store. “We were winning that customer,” Foulkes said.

But catering to that customer led Hudson’s Bay down the wrong path. “We made a mistake where we started buying for that Sears customer more broadly and that quite frankly is too downmarket from where the Bay really is,” said Foulkes.

Repairing that mistake is a work in progress. In the last six months, the chain has cut 300 brands and replaced them with 100 newer ones, including Anthropologie, L.L. Bean, and Mango. The chain also recently launched a shopping app.

Right now the work of bolstering the brand is going on without a top executive over the Hudson’s Bay stores. The chain’s president left in February and hasn’t been replaced. Foulkes has said it’s a top priority for her.

A healthy Hudson’s Bay is crucial to parent company HBC. Last week its board announced it had accepted a bid by a group led by Hudson’s Bay Co Executive Chairman Richard Baker, currently listed on the Toronto Stock Exchange, to become privately owned.

After spending the last 18 months cutting weak businesses from the corporation, including selling off the Lord & Taylor chain, HBC’s European business, and flash sale site Gilt, Hudson’s Bay is even more important to HBC’s bottom line. Over the last few years, Saks Fifth Avenue has been HBC’s strongest performer, but now the American chain’s comparable sales growth is slowing, rising just 0.6% in the most recent quarter.

One way the Saks brand might get a bump up is through a new relationship with a bankrupt rival. Last week, Authentic Brands said it would buy the intellectual property of luxury store Barneys New York in bankruptcy court and lease the name to Saks. Those plans are subject to court approval and have not been refined by Saks yet.

Foulkes doesn’t appear to be worried about Saks’ other competitors. She said that the Neiman Marcus that opened in Manhattan in March has so far had “no effect” on business at the Saks flagship, which recently underwent a $250 million renovation.

She added that Nordstrom, which last week opened a massive New York City store, doesn’t serve exactly the same customer. Foulkes did acknowledge that both rivals had done a “good job” with their first entrants into the world of New York City department stores.

With underperforming brands sold off, Foulkes said she can focus on HBC’s “two crown jewels,” Saks and Hudson’s Bay.

“They have an absolute right to win in the markets that we’re in,” Foulkes said. And as a private company, that will likely mean fewer distractions.

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