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Hudson’s Bay Prepares for Liquidation Amid Financial Challenges
Hudson’s Bay, Canada’s oldest retail company, announced plans for an immediate liquidation of its assets beginning next week, potentially concluding by June. This strategic move comes as the company grapples with a lack of financing needed to sustain its operations.
The intended liquidation could lead to substantial job losses, affecting approximately 9,364 employees across Hudson’s Bay locations, three Saks Fifth Avenue stores, and 13 Saks Off 5th outlets under a licensing arrangement. The dire circumstances are contingent upon an upcoming court appearance scheduled for Monday.
Despite the somber outlook, the management remains hopeful about securing the necessary financial backing and negotiating with key stakeholders, particularly landlords, in an effort to stave off a total shutdown.
“Our team has worked incredibly hard to identify a viable path forward,” said Liz Rodbell, president and CEO of Hudson’s Bay, emphasizing the strong support from customers and employees who value the store’s historical significance to their communities. “These powerful experiences remind us of our responsibility to pursue every opportunity to secure the necessary support.”
With origins dating back to 1670, Hudson’s Bay operates around 80 stores across Canada. The company plans to auction its assets in the coming months, pending judicial approval, after securing limited debtor-in-possession financing aimed at facilitating its restructuring efforts.
If a swift liquidation is not implemented, Hudson’s Bay indicated it would be unable to meet its financial obligations, as it currently has very limited liquidity. Chief Financial Officer Jennifer Bewley noted in a court affidavit that the liquidation must be wrapped up by June 15 to prevent further financial distress.
The financial unraveling became apparent just last week when Hudson’s Bay filed for creditor protection, citing a myriad of challenges including decreased consumer spending, strained trade relations between Canada and the U.S., and reductions in foot traffic at downtown stores after the pandemic. These filings revealed that the retailer owes over $950 million to a broad array of creditors, ranging from landlords to prominent fashion brands like Ralph Lauren and Chanel.
Hudson’s Bay has faced severe financial adversity, including instances where landlords resorted to lockouts due to payment disputes. The recent days have seen the company’s position deteriorate, despite its prior optimism for survival.
The structure of Hudson’s Bay’s creditor protection, initiated after spinning off its U.S. operations into a separate entity, underscores the complexities of the retail environment it navigates. A complete liquidation would not only signify a major shift in Canada’s retail landscape but would also significantly impact the workforce and the commercial real estate sector, especially in high-profile shopping areas.
Most of its locations are found in Ontario, with significant footprints in B.C., Alberta, Quebec, and other provinces. The potential closures would leave large vacancies in malls and city centres, as Hudson’s Bay stores typically occupy larger spaces than many competitors.
Once a staple of Canadian retail, Hudson’s Bay has been guided by U.S. leadership in recent years, following its acquisition by American real estate magnate Richard Baker in 2008 for $1.1 billion. The company went public in 2012 and returned to private ownership shortly thereafter, amidst ongoing challenges further complicated by the onset of the COVID-19 pandemic.
Baker acknowledged the hurdles facing the brand in early 2020, recognizing that realizing its potential would require a long-term commitment of resources. However, ongoing challenges and market competition have hindered recovery efforts as online retail continues to gain traction.
As Hudson’s Bay faces this pivotal moment, the implications of its decisions resonate beyond the company itself, posing significant ramifications for employees, consumers, and the broader Canadian retail landscape.
Source
globalnews.ca