- An activist shareholder’s efforts to shake up Hudson’s Bay could be beginning to pay off. Reuters, citing unnamed people familiar with the matter, reported Friday that the department store retailer is looking for an adviser to help it review its financial options, which include going private and selling off real estate assets. A spokesperson said Hudson's Bay does not comment on "rumor or speculation."
- In June, Jonathan Litt’s Land & Buildings announced a stake of 4.3% in the retailer, which operates Saks and Lord & Taylor. Litt, writing for the fund, pressed the company to sell off its most valuable real estate holdings, including its iconic Saks store on Fifth Avenue in Manhattan, possibly to fund a go-private transaction. Soon after, more investors reportedly joined Litt’s call.
- Earlier this year, the conglomerate was said to be shopping for other department store chains to bring into its fold, including Macy’s and Neiman Marcus. But those efforts have so far been unsuccessful.
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.
But that’s not enough for Litt, who said in his June letter he considered Hudson’s Bay as “a real estate company, full stop” that should sell off even its “crown jewels” — including the famous Manhattan 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 improves their credit ratings, making it easier to borrow when they need to invest in their operations, and also keep their debt and interest burdens lower so they can navigate tough markets.
Macy’s, as one example, recently fended off 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.
A go-private transaction, however it’s funded, would likely satisfy Litt and other investors, rid the retailer of activists for good and could allow it to invest in the business outside of a Wall Street climate skeptical of brick-and-mortar retail’s long-term prospects. Executives at fellow department store retailer Nordstrom are reportedly working to take the company private, which some think could make the company stronger in the long run.