Hudson’s Bay Company, the Toronto-based department store chain and website, disclosed Friday that it is restructuring its business and has been granted protection from its creditors by a Canadian court.
The Canadian retailer said it has commenced proceedings under the Companies’ Creditors Arrangement Act (CCAA) pursuant to an initial order for creditor protection from the Ontario Superior Court of Justice.
While not calling the maneuver a bankruptcy, it’s similar to a Chapter 11 bankruptcy filing in the U.S. involving restructuring a business with the intent to keep it operating. Like in a typical Chapter 11, Hudson’s Bay will be examining its store fleet, payroll and other operations and assets to determine what should be kept or disposed. Alvarez & Marsal Canada Inc. has been appointed as the monitor to oversee the CCAA proceedings.
Restore Capital, an affiliate of Hilco Global, together with other lenders, have committed to providing interim debtor-in-possession financing for Hudson’s Bay with a $16 million (Canadian) advance that has been approved. But more financing will be sought to fund the business during the proceedings.
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The company has said the money enables it to keep operating for 10 days, at which time it must present a restructuring plan to the court or request an extension.
“Hudson’s Bay has been a vital retailer to Canadians for generations, and this decision was made with the best interests of our customers, associates and partners in mind,” Liz Rodbell, president and chief executive officer of Hudson’s Bay, said in a statement Friday evening. “While very difficult, this is a necessary step to strengthen our foundation and ensure that we remain a significant part of Canada’s retail landscape, despite the sector-wide challenges that have forced other retailers to exit the market. Now more
than ever, it is critical that Canadian businesses are protected and positioned to succeed.”
Rodbell added, “Earlier this year, we worked with potential investors to refinance a portion of our credit facilities to improve our liquidity and support our business plan. However, the threat and realization of a trade war has created significant market uncertainty and has impacted our ability to complete these transactions.”
While pegging the bankruptcy on sector conditions and the trade war with the U.S., Hudson’s Bay has been struggling on and off for years. The company has undergone multiple restructurings, ownership changes, and strategic shifts to stay afloat. Executives from Hudson’s Bay acknowledged to WWD last August that the company did not rebound after the pandemic the way U.S. retailers did. They also said that heavy investments in digital capabilities and inventory in Canada did not pay off, and that Hudson’s Bay had to clear merchandise more aggressively than it wanted, particularly when Nordstrom liquidated in Canada and Bed Bath & Beyond went bankrupt. The situation was further complicated when discretionary spending, even in the luxury sector, weakened. A few years ago, Hudson’s Bay split its store operations and e-commerce operation into separate companies. That apparently did not work out because about two years ago, the company reengineered back into a single entity.
Company executives have also blamed Hudson Bay’s difficulties for “triggering” slowed payments to Saks Fifth Avenue and Saks Off 5th vendors, but last December, Saks Fifth Avenue purchased the Neiman Marcus Group and in the process formed Saks Global. Hudson’s Bay is not part of Saks Global. Through a license agreement, Hudson’s Bay has a small footprint of three Saks Fifth Avenue and 13 Saks Off 5th stores in Canada, which the company said will continue to operate.
One source close to Hudson’s Bay said, “This is not a Nordstrom or Target situation. Hudson Bay plans to restructure and emerge from this.” Nordstrom and Target both rolled out stores in Canada, only to close them years ago. Another source in Vancouver said, “I was at the store last week to buy some bedding. There were almost no employees around. It was not a happy environment to buy anything.” She didn’t buy bedding.
Hudson’s Bay operates 80 stores. It’s expected that certain stores will close, but it’s too early to announce any. WWD has reported that the Hudson’s Bay store in Toronto is expected to be shuttered; however, the company is not commenting on that.
“Hudson’s Bay remains deeply connected to Canada and is focused on the
future. Our goal is to reestablish our foothold and ensure the company’s long-term place in the evolving Canadian retail market,” Rodbell stated. “As we go through this process, we will continue to show up for our customers and communities, as we always have.”
In its announcement Friday, Hudson’s Bay listed several reasons for restructuring, citing “ongoing trade tensions with the U.S., including the new and wide-ranging tariffs on exports to the U.S., together with retaliatory tariffs imposed by Canada on U.S. imports.”
Hudson Bay said the situation has created economic uncertainty, directly
impacting refinancing efforts and limiting access to the capital needed to support the
business.
Hudson’s Bay also cited “post-pandemic shifts” — in particular work-from-home policies — reducing the size of populations in downtown areas, and rising costs of living, higher mortgage rates, and a weakening Canadian dollar straining household budgets, and reducing discretionary spending. Hudson’s Bay’s Toronto flagship is located on Queen Street, which is in the heart of the city.
Hudson’s Bay is considered North America’s oldest company, founded 355 years ago.
