Interesting local stuff in bold.
HBC toys with the idea of an IPO
Toronto Star
July 10, 2012
Francine Kopun
Business Reporter
With an apparently improved balance sheet and a new and improved look in flagship stores, could Hudson’s Bay Company be planning an initial public offering?
That’s the question being raised in the fashion press. A WWD.com story published Tuesday says HBC’s owners are looking to cash out, possibly through a public offering in the near future.
“There is nothing on the radar at the moment,” Richard Baker, governor and CEO of HBC told WWD. “But it could come at any time.”
HBC is the parent company of the Bay, Home Outfitters and, in the United States, Lord & Taylor.
In 2011, it was reported that Baker was speaking to bankers about a possible 20 per cent IPO on the Toronto Stock Exchange. The idea died on market volatility.
“I don’t think the time is right for any equity offerings in general. The whole mood of the markets is negative,” said Robert Gibson, head of research for Octagon Capital.
“But if the opportunity comes up and the price is right, it could go.”
Gibson said that an IPO for a retailer like HBC with operations on both sides of the border would likely generate more interest because the retail sector in Canada is about to be shaken up with the arrival of discount retailer Target in 2013.
Jeff Doucette, retail consultant at Field Agent Canada, said it is unclear how much value there is in HBC. As a privately-held company, HBC is not required to publicly report financial results.
“They’ve done a fair bit of turning around. I just don’t know if they’ve turned it around enough,” said Doucette.
“There’s still a lot of Bay stores that look a lot like they always did.”
In the WWD story, HBC president Bonnie Brooks hints at a new retail partner joining the Bay. She says the Toronto Queen Street location is close to signing an agreement for a 20,000-square-foot franchise on the seventh floor.
That is in addition to the TopShop expansion now underway.
“It will be a new fashion and home concept and another franchise for Canada,” Brooks said, declining to provide further details.
Brooks and Baker declined to be interviewed for this story.
Brooks has made major changes to the Queen Street flagship, but the Bay on Bloor Street remains tired-looking. According to WWD, an announcement about an overhaul at the location is expected soon.
Baker also held the door open to U.S. retailers hoping to open up shop in Canada.
“We are talking to other retailers. We have an opportunity to leverage both our real estate and infrastructure. So if you are a retailer and want to come to Canada, we can roll you out much quicker and efficiently. It’s too expensive for many retailers to come into Canada on their own.”
Nordstrom has said it is looking for Canadian real estate and it has been reported that Bloomingdale’s is coming to Canada.
John Williams, a consultant with J.C. Williams Group in Toronto, said Brooks has done a great job turning around the Bay.
“The Bay has become relevant again, which I don’t think it was when she took it over,” he said.
But he said that the Bay is still a department store and there’s not a lot of opportunity for robust, strong, long-term growth in department stores.
HBC was purchased in 2008 for $1.1 billion by NRDC Equity Partners. Lord & Taylor was purchased by NRDC for $1 billion in 2006. Baker is chairman and CEO of NRDC.
Selling Zellers leases for $1.83-billion to U.S. discount retailer Target Corp. purportedly helped clean up the balance sheet at HBC.
According to WWD, HBC has revenues of about $4 billion, excluding the Zellers stores.
According to WWD, costs at the Bay have been cut by significant streamlining of staff and back-of-house integrations across divisions, led by the behind-the-scenes chief operating officer Don Watros.
WWD reports that according to industry estimates, the Bay ran flat or negative comparable-store sales for 20 years until 2010, when it was up 2 per cent. Last year, it was ahead 5 per cent and this year it is tracking at 8 per cent. Lord & Taylor turned around in August 2009, and has since been up 8 to 10 per cent annually.
Earnings before interest, taxes, depreciation and appreciation, or EBITDA, at HBC has risen from $105 million in 2008 to an expected $450 million in 2012, according to WWD.
Baker told WWD he will spend over $1-billion over the next five years, touching up all 91 Bay stores and 48 Lord & Taylor stores. Much of the money is earmarked for rolling out TopShop franchises inside the Bay stores and other brands, yet to be unveiled.
Brooks also said HBC will launch a new platform with state-of-the-art technology for Lord & Taylor and the Bay and intends to grow the online business 75 per cent in 2012 over 2011.
And as Brooks has pointed out publicly more than once, the portfolio of HBC stores includes vast, prime retail locations across Canada.
HBC owns all of its flagship locations, including Lord & Taylor on Fifth Avenue in New York City and the Bay’s six flagships in Canada.
