• by Thom Forbes  @tforbes, May 7, 2019

Hudson’s Bay Co. says it is “pursuing strategic alternatives” for its venerable Lord & Taylor stores, a process that may include a sale or merger with another operation struggling to find purpose and profit in the real world of bricks, mortar and traffic jams.

“Lord & Taylor has struggled as more people shop online. Hudson’s Bay has closed some of its stores, including Lord & Taylor’s flagship store on New York’s Fifth Avenue, which was shut for good earlier this year after more than a century in the 11-story building. Last year, to attract new customers, Lord & Taylor started selling its brands on Walmart’s website,” the AP’s Joseph Pisani writes.

The department store sold its flagship Fifth Avenue store to WeWork for $850 million in 2017.

“The original plan was for the store to become WeWork's New York headquarters after the 2018 holiday season. After that, part of the building would continue to be run as a scaled-down Lord & Taylor. But Lord & Taylor changed its plans last year and decided to shut down its part of the store,” Nathaniel Meyersohn writes for CNN Business.

But its store on Walmart’s website, featuring about 150 brands, is seemingly doing well.

“We're really happy the way it came out, the way it looks. Shoppers like it,” Walmart CEO Doug McMillon told analysts last year, Meyersohn reports.

“The upheaval in U.S. retailing couldn’t come at a worse time for HBC, which had aggressively expanded its footprint in the U.S. over the past seven years. It snapped up in quick succession Lord & Taylor in 2012, Saks a year later and flash-sale website Gilt in 2016. It also made an approach for Macy’s in 2017, but those talks were reported to have stalled after the Canadian group failed to secure equity financing for what could have been a $10 billion-plus deal,” Pan Kwan Yuk writes for Financial Times.

“Lord & Taylor is a storied brand that has stood for quality, style and service for many years and serves a highly engaged, loyal customer base through a dedicated team of associates. Throughout the review, Lord & Taylor remains committed to serving customers across our stores and digital channels,” says HBC CEO Helena Foukles in the release announcing its “strategy to focus on its greatest opportunities.”

“The discussions center on the operating business, not the real estate … a person familiar with the situation said," Suzanne Kapner writes for the Wall Street Journal. “Separately, Hudson’s Bay chairman Richard Baker has been sounding out landlords about buying back leases and also discussing plans to redevelop some sites without Lord & Taylor, according to people familiar with the matter.”

“This review of strategic alternatives for Lord & Taylor is another example of how we are exploring options to position HBC for long-term success,” Foulkes declares in the release. 

“Lord & Taylor’s footprint has fallen to 45 department stores as of Feb. 2, down from 50 a year ago,” Amelia Lucas writes for CNBC. “Lord & Taylor’s parent company has been trying to simplify its organization, strengthen its retail operations and improve its cost structure.”

“Lord & Taylor has been in retail no-man’s-land for decades, going back to its makeover in the hands of its onetime owner, the late and sometimes lamented May Co. As part of that onetime department store chain, Lord & Taylor was dumbed down from its more premium positioning in the marketplace and made to fit into the legendary May matrix, which said that all of these things are the same and none of them are different,” Warren Shoulberg observes for Forbes.

“HBC bought the chain in 2006 after May was sold to Federated and the new owners realized there wasn’t a fit for the brand within its eventual Macy’s/Bloomingdales structure. Give them credit for figuring that out fast and also for finding a motivated buyer in Richard Baker, head of HBC, who was on a buying spree to grab up retail nameplates.”

But, Shoulberg points out, “Baker and company didn’t quite know where to put Lord & Taylor either.”

“Baker, executive chairman of HBC and a U.S. real-estate expert, acquired Lord & Taylor through his private equity firm … for $1.2 billion and, two years later, snapped up HBC for just a little more, most of it with debt, gaining efficiencies and enjoying signs of a turnaround. But after the recession and the purchase of other retailers, HBC was hobbled by a slow economy, its own missteps and consumers’ shifting shopping habits,” writes Marina Strauss for the Toronto Globe and Mail.

But even as that shift continues, physical stores apparently still have a place in the hearts of millennial shoppers, as long as the online and bricks-and-mortar experience is seamless.