HBC on Monday announced it is "pursuing strategic alternatives for the Lord + Taylor operating business, including a possible sale or merger."
HBC has retained PJ Solomon as its financial adviser for the review of the Lord & Taylor operating business, according to a company press release. "Throughout the review, Lord + Taylor remains committed to serving customers across our stores and digital channels," HBC CEO Helena Foulkes said in a statement.
Lord & Taylor in 2018 notched annual revenue of CAD$1.4 billion ($1 billion), through its website and more than 40 stores, mostly in the Northeast and mid-Atlantic U.S., the company said. Lord & Taylor also has a partnership with Walmart.com.
HBC has long worked to take advantage of its real estate, and Lord & Taylor's value to HBC is increasingly difficult to find in its department store operations, while easier to find in its property holdings. In February it closed on the sale of the Lord & Taylor Fifth Avenue building to WeWork Property Investors for CAD$1.1 billion, or $850 million, so the value of that building alone nearly reached its annual sales.
Indeed, last year HBC was reportedly looking to unload not just the Manhattan flagship and its Skokie, Illinois, location (shuttered in 2017 after months of pressure from activist investor Land & Buildings Investment Management to sell off its best properties and deliver the proceeds to investors), but the entire chain.
That's now officially on the table as part of a wider effort to bring HBC the utmost in profitability and potential for growth. The company in recent years has been simplifying its organization, strengthening its retail operations and unlocking the value of its real estate, and its review of its options for Lord & Taylor "is another example of how we are exploring options to position HBC for long-term success," Foulkes also said in her statement. "Over the last year, we've taken bold actions and made fundamental fixes that have resulted in a far stronger, more capable HBC, having returned to positive operating cash flow, increased profitability and strengthened the balance sheet."
Lord & Taylor is low-hanging fruit for the company, which also runs Saks Fifth Avenue and Hudson's Bay Co. in Canada. The middle-of-the-road department store banner saw its year-over-year sales decline, and together with Hudson's Bay and the now-shuttered Home Outfitters, store comps fell 5.2%, according to its most recent report. Aside from the closure of its Canadian Home Outfitters furniture business, the fate of its Canadian operations remains unclear. But in the U.S. the company is aiming for the luxury segment, according to Bob Phibbs, CEO of the consulting firm The Retail Doctor.
"They have neglected the brand for a long time. Let's face it, the money's in Saks, and clearly they realize that the middle is going to be suffering," he told Retail Dive in an interview. "Lord & Taylor was always a cut above Penney and direct competitor Macy's. But the middle is getting squeezed, unless you're willing to spend money on your stores like they did with Saks. The question becomes what happens to the Lord & Taylor brand — who would buy it? With 40 stores it's not a big enough chain. But it is still an iconic brand and you could find someone willing to do it as you saw with FAO Schwarz."
The fleet could be sold off piecemeal or in one swoop, but HBC doesn't likely care how it goes, as long as the proceeds go to trim down its debt and possibly help fund a turnaround at Hudson's Bay, he also said.