TORONTO -- The made-in-England Hudson’s Bay wool point blankets, which date back to 1779, haven’t changed much in 240 years - except for the cost. Once used as a pricing measure in its fur trading business, you can still buy one today for $325 to $550, depending on the size.

Like the blanket it sells, Hudson’s Bay’s origins are inextricably linked with Canada’s own, steeped in history and surviving centuries of change. But as the iconic retailer approaches its 350th anniversary this year, it is at a major crossroad, struggling in a complex and challenging retail environment that is changing faster than the company itself, and must take radical steps that may well determine its future.

After more than seven years as a publicly traded company, the Saks Fifth Avenue owner is expected to go private later this year following a contentious public battle that pitted the company’s biggest shareholders against minority investors blocking the deal.

Late last Friday, a consortium led by HBC’s governor and executive chairman, Richard Baker, announced it finally won the backing of its most vocal opponent, Catalyst Capital Group, after it sweetened its bid for a second time. While there are scenarios in which the deal could still be scuttled, it is expected to get approval through a special vote in February.

The company did not comment for this story, but executives have previously said it would continue to invest in its businesses, improve customer experience, cut costs, streamline operations, and capitalize on its real estate - regardless of the vote outcome.

Hudson's Bay Company store in Vancouver
A Hudson's Bay Company store is seen in Vancouver, B.C., on June 10, 1918. (National Archives of Canada/W.H. Calder via The Canadian Press)

But after reporting huge losses and an enormously disappointing failed expansion into Europe, among a litany of other setbacks, some industry experts are questioning the company’s future.

“I don’t believe HBC will survive,” said Doug Stephens, founder of Retail Prophet, giving the company less than three years - no matter if it goes private or remains public.

“(Baker has) essentially sold off Lord & Taylor, The Bay is on life support, and their Home Outfitters business in Canada - once the golden child of profitability - has closed. Saks is about the only viable entity left and some feel that even that’s being bungled,” Stephens said.

Whether Hudson’s Bay becomes another Sears Canada, the last department store chain to disappear off the Canadian retail map, remains to be seen.

Sears basically liquidated itself slowly over time, which is not the case here, says Craig Patterson, a retail analyst and consultant, and founder of Retail Insider. “They’re just floundering with their overall strategy.”

“The problem with Hudson’s Bay is they have stores that are quite often unremarkable ... Why are some stores even open?” asked Patterson, a 25-year industry veteran who says the company should slash their Hudson’s Bay store count down to a third.

Most Canadians are not experiencing the company’s flagship Queen Street store in downtown Toronto when they shop at a Hudson’s Bay, he said, adding that Edmonton, for example, does not need half a dozen Bay stores.

HBC currently operates 89 Hudson’s Bays, 42 Saks Fifth Avenue stores, and 115 Saks Off 5ths.

Shareholders and retail analysts have all called for more strategic and drastic store closures for years, arguing that a spacious, but tired department store is not always the most efficient or profitable use of space and devalues the Hudson’s Bay brand.

The company has taken steps in that direction in recent years - workspace sharing company WeWork leases retail space in several prime Hudson’s Bay locations, for example - but experts agree much more needs to be done in order to succeed in a cut-throat and fast-changing retail climate that is nowhere close to quieting down.


Broadly, the embattled industry has undergone a great deal of consolidation and change as part of the sector’s effort to innovate and survive in an increasingly digital and “experiential” environment. The department store model in particular - especially the mid-tier segment to which the Hudson’s Bay brand belongs - is shrinking, and some would argue even dying.

In 2019, more than 9,300 retail stores closed just in the United States, according to Coresight Research. Meanwhile, Retail Insider says more than 100 foreign retailers have entered the Canadian market in the last three years alone, adding to the competitive pressure.

To compete with online shopping, traditional brick-and-mortar stores need to be more nimble, but also lure shoppers to their store not just for showrooming (the practice of looking at a product and then buying it elsewhere online at a lower price), retail experts say.

Strategies might include having products that can not be found elsewhere, doing limited-edition product drops, or offering “one stop shopping” with brands operating their own boutiques within a store. It may also mean integrating augmented reality technology that simplifies the shopping experience, allowing customers to try on clothes or make-up virtually. It could also means turning stores into social hubs, and include food halls and entertainment.

A Hudson's Bay Company warehouse
A Hudson's Bay worker boxes items picked by the company's new robotic fulfillment system in Toronto on Friday November 4, 2016. THE CANADIAN PRESS/Frank Gunn

The new Canada Goose store at Sherway Gardens Mall in Toronto for example, carries no inventory. Instead, the entire store is a sensory experience: The glass floor at the cave-like entrance simulates cracking ice, while the “cold room” inside imitates arctic conditions and includes actual snow. If a customer decides to make a purchase, the product is ordered and shipped directly to their home.

“You have to make it magical, otherwise people will just go to Amazon,” said Patterson, adding that there are enormously successful department stores in Europe and Asia that prove profitability is possible.

Department stores have a lot of space, so they have an opportunity smaller retailers do not in terms of creating experiences, Patterson said. “It’s an opportunity to do something exceptional, but it costs a lot of money and takes a lot of creativity … it takes guts.”

A major overhaul will require significant time and patience as well, and for HBC, it will also need the right strategy.

In the last decade alone, the company went public, launched massive and splashy expansions into Europe and also pulled out a few short years later. It acquired Saks Fifth Avenue, acquired and divested German retailer Galeria Kaufhof and online website Gilt, opened and closed its Hudson’s Bay Netherlands locations, and sold Lord & Taylor - the oldest department store chain in the United States.

“HBC has experienced a double-whammy,” said Stephens. The company needs to rethink its entire business model for each of its remaining brands, he said.

“They’ve been bolting a lot of things onto what is fundamentally a sinking ship,” he added. “I personally don’t think they’ve got the fortitude or organizational will to engage in such an intensive turnaround.”

Baker, the company’s 39th governor, believes HBC’s challenges are better addressed away from the pressure and scrutiny that comes with short-term results and returns.

It's a sentiment echoed by the Nordstrom family, which had also made attempts at privatization, but failed.

“It has become clear that the significant challenges, risks and uncertainties facing HBC in the rapidly evolving retail environment are best addressed in a private market setting,” Baker said half a year ago when he first offered C$9.45 per share to take the company private.

That offer was eventually raised to C$10.30 a share, but the drama ratcheted up in recent weeks as Catalyst accused Baker of trying to acquire the company “as cheaply as possible.'' The Toronto-based private equity firm lodged a regulatory complaint to block the deal, and made an $11 per share counter offer that was rejected, but ultimately matched last week by Baker and his group. The deal values the retailer at around $2 billion.


By all accounts, the department store hit its stride in the 1980s, but began floundering in the 1990s. During that period, Simpsons (acquired by Hudson’s Bay in 1978), Woolworths, and Eaton’s - major names that shaped the Canadian retail landscape for more than a century - went into decline one by one and eventually shuttered.

“Twenty years ago, people thought Eaton’s was going to be around forever,” said Patterson.

Founded in 1869 by Timothy Eaton, the company was a retail pioneer that went on to become Canada’s largest department store operator. It declared bankruptcy in 1999 and its corporate assets were sold to Sears Canada, also now relegated to history.

“Hopefully the same won’t happen under Baker … It would be a shame if HBC doesn’t survive. A 350-year-old company is worth fighting for,” Patterson said.

Saks Fifth Avenue store in Toronto
An overall view of Saks Fifth Avenue in downtown Toronto from when the store opened in 2016. THE CANADIAN PRESS/Nathan Denette

The company’s roots can be traced back to a Royal Charter granted by King Charles II, which created what became the Hudson’s Bay Company. The charter of 1670 gave the company fur trading monopoly across “Rupert’s Land” - a vast wilderness containing all the waterways that flowed into “Hudson’s Straights”, and stretched across the traditional territories of the Cree, Dene, Inuit, Anishinabek, Eeyou Istchee, Innus, Metis, and many other tribes.

The land, which encompassed roughly a third of what is now Canada and sections of the northern United States, was named after the king’s cousin, Prince Rupert, the first governor of the company. From modern-day Labrador in the east, through a large part of Quebec and Ontario, all of Manitoba, Saskatchewan, parts of Alberta, Nunavut, the Northwest Territories, North and South Dakota, Montana, and Minnesota, millions of square kilometres were included in the Charter.

HBC’s far-reaching claim expanded coast to coast to coast in 1821 when it merged with North West Company, its chief rival. The additional territories included what is now known as British Columbia, Washington, Oregon, Yukon, and Alaska. Trading posts established across the continent became the foundation for cities including Calgary, Edmonton and Winnipeg.

The company’s archives are part of the UNESCO’s Memory of the World Register.

Hudson's Bay underwent a seismic shift some two hundred years after the Royal Charter was signed, when it agreed to surrender “Rupert’s Land” back to the Crown. That land was then officially transferred to Canada in 1870. The company received £300,000, or $512,233 (£35.4 million in 2019, or $60.4 million) in return. And just as the Indigenous population who had inhabited the land for thousands of years did not participate when the Royal Charter was created, they also had no say in the 1868 Rupert’s Land Act.

Like the vast lands it once occupied across the continent for nearly 200 years, real estate is very much a part of HBC. Today, the company owns in whole, or in partnership, 79 department store properties - worth considerably more than what it received for “Rupert’s Land”.

Whether HBC can survive another profound change as a private company remains to be seen.

Stephens described HBC’s decisions over the last six or more years as “a real estate strategy”, not a retail one. “I don’t sense that the move to becoming private has as much to do with innovating their retail business as much as liquidating the real estate business.”

On its face, the Saks Fifth Avenue owner is undoubtedly a retail operator, but for many of its minority investors, the company’s value is in its real estate. But even there, HBC has faced headwinds.

Its Saks flagship in midtown Manhattan, for example, was independently appraised at US$3.7 billion in 2014. This past November, the CBRE Group appraised the 96-year-old HBC crown jewel, which sits across from Rockefeller Center, at US$1.6 billion.

More than 2,600 km away, sitting at another major intersection, this time in downtown Winnipeg, Man., a historic, 650,000 square feet Hudson’s Bay store was appraised at a whopping $0. According to the Winnipeg Free Press, HBC even tried to gift the property to the University of Winnipeg in 2012, and was turned down. The property could be worth just under $11 million if it was subdivided and leased to multiple alternative tenants, according to the appraisal report, but the costs of doing so are astronomical and far exceeds the property’s appraised value.

Despite skepticism from some quarters over the company’s future and its intent, HBC has said publicly that it remains very much committed to its retail business. But the road ahead will be challenging.

“The only true certainty is that retail will be radically different in five years than what we know today,” said Chief Executive Officer Helena Foulkes, at the company’s last investor call in December. At the time, she said their strategy remained unchanged regardless of whether HBC was private or public.

“We're confident in our journey and our promises to do everything within our power to deliver on the extraordinary heritage and potential of HBC.”

- Edited by Senior Producer Mary Nersessian