Hudson's Bay CEO steps down abruptly
- Hudson’s Bay Company, parent of Saks Fifth Avenue and Lord & Taylor, said on Friday that CEO Jerry Storch will step down on Nov. 1. The Canadian department store retailer has hired an executive search firm to find a new CEO, it said in a press release.
- Richard Baker, governor and executive chairman of Hudson’s Bay, and who has previously served as the company's CEO, will take over the chief executive role until a permanent replacement is found, according to the company. Storch, a former Toys R Us executive who joined Hudson’s Bay in 2015, plans to return to his advisory firm, Storch Advisors, the retailer said.
- In recent months, activist investor Land & Buildings Investment Management has targeted Hudson’s Bay, pressing the retailer to sell off its best owned properties and deliver proceeds to investors, perhaps through a go-private buyout. In a statement Monday, the investment firm described Storch’s departure as a "consolidation of power" on Baker’s part that underscored "the board’s attempt to buy time and placate investors to address underperformance and undervaluation." Land & Buildings added that it has no confidence in the board and plans on calling a special meeting of investors at some point. At the meeting, it plans to release proposals for Hudson’s Bay, which could include removal of directors, Land & Buildings said.
It’s been a tumultuous year at Hudson’s Bay.
Storch is the second top executive to leave this year, after the company announced in May the departure of interim CFO Paul Beesley, who moved back to Canada from New York to be closer to his family, according to the company. (Beesley was replaced by Edward Record in August.)
The retailer was also reportedly in talks to acquire both Macy’s and Neiman Marcus — but those talks broke down in both cases (with Macy’s because the price was too steep, and with Neiman Marcus because the accompanying debt load was too high).
The company has also slashed jobs, seen its credit downgraded and posted losses this year, even though in the second quarter it managed modest increases in total and comparable store sales. In recent days, reports have also surfaced that the company's Lord & Taylor brand will begin selling on Walmart.com.
And then there’s the activist in the retailer’s midst. Land & Building’s founder, Jonathan Litt, and others have been pressing Hudson’s Bay to cash in on its real estate, after the company had already taken significant steps in that direction by spinning off many of its properties into joint ventures the company said could be monetized through an IPO.
That’s not enough for Litt, who said in a June letter he considered Hudson’s Bay "a real estate company, full stop" that should sell off even its "crown jewels" — including a famous Manhattan Saks store property.
But retailers who own their property do so for a reason. It creates certainty in their geographic footprint, stability in their balance sheets and can improve their credit ratings. Macy’s, as one example, earlier this year fended off hedge fund Starboard Value, which had similar plans for that department store retailer as Litt does for Hudson's Bay. But Starboard ultimately sold off its stake in frustration as Macy's, instead of spinning off its real estate en masse, decided to take a slower, more nuanced approach.
Land & Buildings said Monday, "[I]t is typical for undervalued and struggling companies such as Hudson’s Bay to try to position the exit of top executives as a reason for investors to give them more time to right the ship."
"Jerry Storch is only the most recent casualty at the company, joining several other senior executive departures," including Beesley and Brian Pall, former president of HBC Real Estate, Litt and his team said Monday. "In reality, Executive Chairman Richard Baker, who will be taking on the role of interim CEO, continues to call the shots. This is even more problematic given how Baker has been stonewalling Land & Buildings and the investment community regarding a plan to unlock the value of the real estate embedded in the Company."
- press release HBC Announces CEO Transition
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