Activist investor in Hudson's Bay calls for major changes at retailer

Activist investor Jonathan Litt is renewing his calls for a major restructuring of troubled retailer Hudson's Bay Co., including the sale of lucrative real estate and many of its other businesses.

In a letter sent Wednesday to HBC shareholders, Mr. Litt, founder of Land & Buildings Investment Management, LLC, of ​​Stamford, Connecticut, said that he would speak with the retailer's shareholders about the convening notice. a special meeting to appoint new members to the board of directors, among them potentially a former leader of the HBC, whom he did not appoint.

Mr. Litt, who launched his call for change at HBC more than a year ago, said the Toronto-based retailer should offload its Saks Fifth Avenue brand, including the coveted flagship store in Manhattan; to sell its remaining 50% stake in European Galeria Kaufhof to its main German rival, who has just signed an agreement to buy the other half; sell Lord & Taylor; and transform the properties of its Canadian namesake chain into a Real Estate Investment Trust (REIT) and sublet surplus space.

"HBC's board has a horrendous track record, overseeing more than $ 2 billion worth of shareholder value destruction, with a 60% decline in share price over the last three years," says HBC. the letter from Mr. Litt.

The call for action comes as HBC undertakes a major overhaul of its own company, appointing a new general manager this year, selling nearly half of its stake in its distressed European division and selling its fashion business. flash Gilt.com struggling to revive the fortunes of the company.

By the end of January, HBC is expected to enter into an agreement with WeWork to sell Lord & Taylor's flagship store in Manhattan to the job-sharing company for approximately $ 1 billion, which would go a long way to reducing debt. from HBC.

And although HBC's share price has been in trouble, after the release of Mr. Litt's letter on Wednesday, the stock has risen more than 9% and closed at $ 8.60 on the Toronto Stock Exchange. .

Michael Smedley, chief investment officer at Morgan Meighen & Associates – some of whose clients hold shares in HBC – said that Mr. Litt's proposals were "not new," although some, such as the creation of 39, a REIT and the sale of all of HBC's European operations, make sense. .

Mr. Smedley stated that Richard Baker, Executive Chairman of the Board of Directors of HBC, was sincere in his intention to straighten out the company. But it must take more "dramatic" and "revolutionary" measures to attract more customers.

"I am rather pessimistic about the continuation of department stores," added Mr. Smedley. "They really do not work."

Nevertheless, he added that some, such as Harrods in Britain, are in a category apart, almost like museums, adding that Saks "has a bit of that atmosphere". He applauded Mr. Baker's initiative to launch restaurants in Saks stores, and supported hanging on to Saks. "If you have it, you will not get it anymore."

Walter Loeb, New York trade consultant and former director of HBC, agreed that the retailer should retain Saks' flagship product, although it should close other stores, including more Lord outlets. & Taylor. "Investors are impatient. … there is a lot of work to do. "

Mr Litt said the investor dissatisfaction with HBC 's Baker "continues to weigh on the company' s share price".

HBC representatives have made no comment until the company reports its third quarter results next Wednesday. Mr. Litt, whose company held about 5% of HBC in the summer of 2017, also declined to comment.

Helena Foulkes, a trade veteran who was appointed HBC President and CEO in February, is looking to streamline the business and focus on its weaker parts under new leaders while strengthening its digital and other businesses. She said everything is on the table.

The loss of HBC in the second quarter widened with the decline in sales of Lord & Taylor and its Saks Off 5th discount. On a positive note, sales in its Saks luxury rose 6.7% in stores open a year or more, which is a key indicator for retail.

HBC faced its own mistakes, particularly in its e-commerce and rebate initiatives, in a rapidly changing industry, resulting in all-weather erosion over the last 11 quarters, as well as changes and disruptions. restructuring of executives.