What’s next for Hudson’s Bay? Here’s what experts think

Hudson’s Bay signage is pictured in the financial district in Toronto, Friday, Sept. 8, 2023. THE CANADIAN PRESS/Andrew Lahodynskyj

Canadian shoppers can expect liquidation sales and changes with the operations of Hudson’s Bay as the 355-year-old retailer attempts to stay afloat and restructure, experts say.

The restructuring process for Canada’s oldest company, which was created in 1670, began Friday after it filed for creditor protection to avoid bankruptcy. The retail chain’s president and CEO Liz Rodbell called it a “very difficult” but “necessary” step in a press release March 7.

As Hudson’s Bay restructures through the creditor protection process, the company said in its press release that it is exploring “strategic alternatives and engaging stakeholders” to find ways to preserve and boost its business.

“While no assurances can be provided, these discussions reflect Hudson’s Bay’s commitment to preserving jobs and community ties where possible,” it said.

While the future of Hudson’s Bay is uncertain, what is certain is that changes are coming.

“I don’t see any indication that they’re planning to close all their stores, but they’re probably going to have to close some of their locations, repurpose some of their locations, and change the way they’re doing business in order to make their operations viable,” David Soberman, professor of marketing and the Canadian national chair of strategic marketing at the University of Toronto, said in a video interview with CTVNews.ca.

Soberman said the retailer’s decline is a sad moment for many Canadians and echoes the pattern of other major stores throughout North America that have been struggling and closed locations, such as Sears, Toys ‘R’ Us, Nordstrom and JCPenney.

“I guess it’s part of a trend, but it’s a disturbing trend for Canadians because it’s really the only major department store chain that we have left in the country,” Soberman said.

Two scenarios could happen with the creditor protection hearing, with the high probability an unconfirmed number of stores will close, said Liza Amlani, Toronto-based principal and founder of the Retail Strategy Group, which advises retailers and brands to help them improve their operations.

“Either we’re going to see the store just be eliminated ... or we’re going to see a buyer come in and hopefully save the day,” Amlani said in a video interview with CTVNews.ca. “We’re going to see liquidation, definitely. I think we’re going to see a lot happening around the activity within the stores, whether we see a lot of the underperforming stores close, we’re going to see fixtures for sale, we’re going to see more markdowns.”

‘Haven’t moved with the times’

A source familiar with discussions said Hudson’s Bay is considering shutting about 40 of its 80 stores, The Canadian Press reported Monday. Hudson’s Bay didn’t comment on whether it will close stores.

Focusing on “higher performing” stores and shutting down the ones that are losing money won’t be enough to revive the company, Mark Colgate, a professor of service excellence at the University of Victoria Gustavson School of Business, said in a video interview with CTVNews.ca on Tuesday.

The company will also need to improve the in-store and e-commerce experience for customers, which includes making both experiences “seamless” so shoppers are enticed to buy products both in person and online, Colgate said.

“The biggest issue with Hudson Bay is they haven’t moved with the times,” he said.

Shifting resources from underperforming stores to the successful ones would be “critical” to cutting costs and fostering growth, Colgate said.

Even with these measures, Hudson’s Bay faces “an uphill battle,” said Craig Patterson, founder and publisher of the Retail Insider, a trade news publication, in Toronto. Patterson said people may lose their jobs and malls may have empty spaces for years.

“If Hudson’s Bay could revive the business and make the stores interesting, attractive, a place that people want to come and shop as well as the website, this could be successful,” Patterson said in a video interview with CTVNews.ca on Tuesday.

Hudson’s Bay is also having trouble paying vendors, landlords and service providers. The problem was highlighted by Jennifer Bewley, chief financial officer for Hudson’s Bay’s parent company HBC, in a court filing.

“I think the vendor relationship’s been broken,” Patterson said.

What’s more, customers may not have had the ideal experiences in stores. “Consumers don’t necessarily have the best impression of Hudson’s Bay now,” Patterson said, noting as examples that he has seen “dishevelled” stores and escalators that weren’t working.

How can Hudson’s Bay survive?

The key to reviving Hudson’s Bay may be a bold new owner willing to shake up the company’s business model, said David Ian Gray, principal of retail consultancy firm DIG360 in Port Moody, B.C.

“If a very rare visionary entrepreneur with deep pockets and a lot of patience (owns) it, they might be able to reinvent Hudson’s Bay Company into something suited to the modern retail era,” Gray said in a video interview with CTVNews.ca on Tuesday.

“The whole system was weakened over many years because modern retail doesn’t work having these big, big spaces filled with all kinds of clothing that’s no longer exclusive, you can find it everywhere. With very few staff and (products) being on sale all the time, it’s not a really good business model.”

But Gray said he has doubts about Hudson’s Bay’s ability to make the drastic pivot and find a new visionary owner.

“I’m quite pessimistic about things getting better for them in the long run,” he said. “I think they could come out of this and keep the 40 stores going for anywhere from a year to maybe a number of years. … It’ll still be a gradual decline. I don’t think they’ll be exciting shoppers. I don’t think they’ll be invigorating a new generation.”

The retailer has a lot of work ahead “in order to stay in the game,” Amlani said, adding there’s a real possibility it will meet its demise.

“There’s a fear across the market that this will happen, from the vendor community to brands that are in the Bay stores,” she said. “Many of them are preparing for this.”

With files from The Canadian Press