HBC’s new CEO Helena Foulkes has her work cut out in unforgiving retail sector

TORONTO — Between placating activist investors and developing new ways to grow a veteran business in an increasingly unforgiving sector, new Hudson’s Bay Co. chief executive Helena Foulkes has her work cut out for her.

Foulkes, a former executive with U.S. drugstore giant CVS, will fill the void left at HBC after the abrupt departure last fall of veteran retail executive Jerry Storch, who made a return to his consulting firm after close to three years at the department store retailer’s helm. According to reports, Storch’s vision for the retailer clashed with that of governor and company chairman Richard Baker, who assumed the CEO role on an interim basis after the former CEO’s departure in November.

“HBC has an amazing portfolio of retail banners, valuable real estate and an innovative approach to M&A that give it the ability to win,” Foulkes said in a statement on Monday. “The future of retail will be defined by companies that think creatively about where the consumer and the world are headed.”

She was not available for further comment.

“Helena is a transformational leader who will invigorate the business with a new perspective as we position HBC for the future,” Baker said in a statement. “Throughout her 25 year tenure in retail, she has a proven track record of making bold, strategic choices that, at their core, put the customer first and have proven enormously impactful to business success.”

At No. 12 on Fortune’s 2017 Most Powerful Women list, Foulkes, 53, was most recently executive vice president of CVS Health and president of CVS Pharmacy, in charge of overall retail strategy and operations at 9,700 retail stores, 20 distribution centers and e-commerce sites, as well as merchandising, supply chain, marketing and real estate. Prior to joining CVS in 1992, Foulkes, who has an MBA from Harvard Business School, worked at Goldman, Sachs & Co. and luxury retailer Tiffany & Co.

She was known for boosting the profile of CVS as a proponent of healthy living, spearheading the drive to take tobacco products off its shelves in 2014 and overhauling the retailer’s front-of-store business with an improved selection of beauty products and digital initiatives.

HBC, the owner of Saks Fifth Avenue and Home Outfitters, has seen its shares fall about 11 per cent this year after issuing disappointing third-quarter results in December. It faces continued pressure from shareholder Land and Buildings Investment Management to divest more of its real estate, sell its lagging European department store business or go private. The stock fell 2.6 per cent on the Toronto Stock Exchange to around $10 per share amid a broad downturn in equity markets Monday.

Last week, Land and Buildings founder Jonathan Litt reiterated some of his demands, saying HBC is “flush with cash” to go private after a US$500 million equity investment from Rhone Capital in December, part of a deal that saw HBC sell its Lord & Taylor flagship store in New York to house the head offices of shared office space company WeWork Cos.

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HBC names CVS Health executive Helena Foulkes as its new CEO

TORONTO — A former pharmaceutical executive will be the new CEO for Hudson’s Bay Co., Canada’s oldest department store chain announced Monday.

Helena Foulkes will start in the role on Feb. 19, the company said in a statement.

She takes over for Richard Baker, who has been acting as interim CEO since the departure of Jerry Storch last fall. Baker will continue as governor and executive chairman.

“Helena is a transformational leader who will invigorate the business with a new perspective as we position HBC for the future,” Baker said in a statement.

“Throughout her 25-year tenure in retail, she has a proven track record of making bold, strategic choices that, at their core, put the customer first and have proven enormously impactful to business success.”

Foulkes comes to HBC from CVS Health Corp., a health-care company with about 9,600 pharmacies. Since January 2014, Foulkes was the company’s executive vice-president and president of subsidiary CVS Pharmacy.

At the department store chain, Foulkes will be responsible for HBC’s global strategy and operations for all of its banners. She will also be appointed to HBC’s board of directors.

“The future of retail will be defined by companies that think creatively about where the consumer and the world are headed,” Foulkes said in a statement.

Foulkes added that one of her priorities will be to “build upon strategies that capitalize HBC’s physical and digital assets and deepen our core operating effectiveness.”

The department store is grappling with persistent losses in an increasingly tough retail environment by implementing a transformation plan.

It included cutting 2,000 jobs across North America in an effort to save the company $350 million annually by the end of fiscal 2018. The company has also expanded its online offerings and is looking at ways to unlock more value from its vast real estate holdings.

Hudson’s Bay shares plummet after retailer reports lower sales, almost doubled losses

TORONTO — Sales at Hudson’s Bay Co. slid 4.2 per cent and losses almost doubled as the department store conglomerate saw ongoing weakness in its Lord & Taylor and European business.

The retailer’s shares plunged 11 per cent to $10.58 in early trading. The company’s stock had fallen 20 per cent over the last year prior to Wednesday’s market open due to the retailer’s tepid performance and concerns about the future of department stores.

HBC declared a net loss of $243 million, or $1.33 per share, compared with $125 million (69 cents) in the prior year. Analysts were expecting a net loss of $138.2 million, according to mean estimates from Thomson Reuters. Retail sales fell to $3.16 billion from $3.3 billion in the third quarter of 2016.

Citing lower customer traffic across of its banners and higher sales promotions, chief financial officer Ed Record said overall third quarter results failed to meet management’s expectations.

“The workforce reductions made as part of our transformation plan caused some operational challenges, particularly in our digital business, which we are working to address,” he said in a statement accompanying earnings. “We know we can do better, and our highest priorities include increasing comparable sales, improving margins, and prioritizing our capital investments as we focus on further developing our digital business.”

Comparable or same-store sales, a key sales measure that strips out the effects of square footage changes, fell 5.1 per cent, and fell 3.2 on a constant currency basis. Management said same-store sales rose 0.2 per cent at Saks Fifth Avenue and were positive for the 29th consecutive quarter at Hudson’s Bay in Canada, though the company did not break out the Canadian retailer’s performance.

But sales in HBC’s “department store group,” which includes Hudson’s Bay in Canada, Lord & Taylor stores in the U.S. and Home Outfitters, fell 3.7 per cent.

Same-store sales slid 3 per cent at HBC Europe and by 7.6 per cent at HBC’s off price division, which includes Saks Off Fifth.

Record said the retailer will reduce its inventory in order to decrease the number of sales it is holding to clear merchandise and re-allocate resources to improve its online capabilities.

Financial Post



Hudson’s Bay Co reports $243 million third-quarter loss, with sales down from last year

TORONTO — Hudson’s Bay Co. lost $243 million in its latest quarter as sales fell compared with a year ago.

The retailer says the loss amounted to $1.33 per diluted share for the 13 weeks ended Oct. 28 compared with a loss of $125 million or 69 cents per diluted share a year ago.

Retail sales totalled $3.16 billion, down from $3.30 billion in the same quarter last year.

Consolidated comparable sales fell 3.2 per cent on a constant currency basis and 5.1 per cent as reported.

The company says that while its Saks Fifth Avenue and Hudson’s Bay businesses performed well, its overall third-quarter results did not meet expectations.

It says that job cuts made as part of its transformation plan caused some operational challenges, particularly in its digital business.

HBC’s banners include Hudson’s Bay, Lord and Taylor, Saks Fifth Avenue, Gilt, Saks Off 5th, German department store group Galeria Kaufhof and Galeria Inno, a department store chain in Belgium.

Hudson’s Bay reaches agreement with Land & Buildings on Rhone Capital investment

Canadian retailer Hudson’s Bay Co said on Friday it reached an agreement with Land & Buildings, under which the activist investor would withdraw its appeal against the conditional approval given for Rhone Capital’s investment.

Hudson’s Bay had said Rhone Capital would invest US$500 million in the form of eight-year mandatory convertible preferred shares.

© Thomson Reuters 2017

HBC withholding info in deceptive-pricing probe, Competition Commissioner says

TORONTO — The Commissioner of Competition has accused Hudson’s Bay Co. of possibly withholding tens of thousands of documents in a case of alleged deceptive pricing practices, but the department store chain said the commissioner’s request is irrelevant and too broad.

The commissioner filed a request to the Competition Tribunal to require HBC to produce documents related to its pricing practices of mattress and box spring sets, as well as other products from February 2015 until now.

The request asked the tribunal to strike HBC’s response from the record should it fail to produce the documents within 10 days.

HBC responded by asking the tribunal to dismiss the commissioner’s motion on the basis that the documents from the time frame are not relevant and the request for that many documents within 10 days is too broad, unreasonable and unrealistic.

HBC said it would be a considerable burden to comply and the company has already spent more than US$425,000 to gather 37,000 documents from different dates for the commissioner.

In February, the Competition Bureau accused the department store chain of misleading consumers over sleep set prices since at least March 2013 — a claim HBC disputes. The proceedings are ongoing.

“We take compliance with all laws and regulations very seriously, and we believe our mattress pricing process is fair, competitive and in line with industry standards and the Competition Act,” HBC said in a statement.

Hudson’s Bay Co says almost two-thirds of shareholders back Rhone investment opposed by activist

Canadian retailer Hudson’s Bay Co on Monday said almost two-thirds of its shareholders support a US$500 million investment by Rhone Capital, which is being opposed by activist fund Land and Buildings LLC.

The Ontario Securities Commission on Friday adjourned a hearing of the fund’s appeal against a conditional approval for the investment.

Earlier this month, Hudson’s Bay said it had written consent from shareholders representing well over 50 per cent of its outstanding shares.

Land and Buildings, headed by Jonathan Litt, had urged the company to call for a non-insider vote on Rhone Capital’s investment, saying shareholders who supported the deal had a “special interest.”

Land and Buildings had a near 5 per cent stake in Hudson’s Bay as of July.

Last month, Hudson’s Bay said Rhone Capital would invest $500 million in the form of eight-year mandatory convertible preferred shares.

© Thomson Reuters 2017

HBC says Competition Bureau’s mattress pricing probe has cost it US$425,000

OTTAWA — Hudson’s Bay Co. says it has spent more than US$425,000 to date to comply with demands for documents from Canada’s competition watchdog as it investigates alleged deceptive pricing practices.

The retailer says in a filing with the Competition Tribunal that it has invested more than 6,500 person-hours to produce 37,000 documents in response to the Competition Bureau’s complaint made last February.

In the filing, HBC says a recent request for more documents is unreasonable because they would be dated after the latest alleged offense mentioned in the original complaint.

The bureau claims that HBC offered mattresses and foundations sold together at grossly inflated regular prices so that it could then claim deep discounts on the sleep sets to suggest significant deals for customers.

It accuses the company of engaging in that practice throughout Canada between March 2013 and January 2015 and is seeking an administrative monetary penalty and costs of the proceeding, along with assurances the practices will stop.

HBC denied its pricing practices were deceptive in a filing of defence in April.