Tommy Hilfiger Treks Up North -- Menswear Launch Planned for The Bay

by Lisa Lockwood
From WWD Issue 05/26/2011

The Tommy Hilfiger Group, wholly owned by Phillips-Van Heusen Corp., has a new distribution strategy to tackle the Canadian market.

The firm has signed a deal to offer Hilfiger men’s wear exclusively in 90 The Bay stores across Canada, beginning in August.

The launch of Hilfiger’s men’s sportswear at The Bay signals the brand’s reentry into the wholesale distribution channel after a few years of a retail-only business model in Canada. Hilfiger will invest in the development of fixtured shop-in-shop environments in key doors. In August, 66 locations, including The Bay’s flagships in downtown Toronto, downtown Montreal and Vancouver, will open Hilfiger shops, followed by 24 more throughout the fall. The average Hilfiger men’s wear shop will be about 500 square feet, but will measure 750 square feet in the Toronto, Montreal and Vancouver flagships.

“With this partnership, we are nearly doubling our presence in Canada, which reflects both our enthusiasm and our deep commitment to this market,” said Gary Sheinbaum, chief executive officer of Tommy Hilfiger North America. “In the United States, the strategic alliance with Macy’s has served our business very well over the past three years, and we’re confident that this new arrangement with The Bay will have a similar impact.”

Hilfiger’s men’s sportswear line for The Bay will be similar to that being produced for Macy’s. It will include wovens, knits, sweaters, pants and jackets. The Hilfiger women’s line isn’t part of The Bay deal.

Bonnie Brooks, president and ceo of The Bay, added, “With one of the most recognized lifestyle brands available in 90 stores, The Bay will provide Canadian customers the full Tommy Hilfiger shopping experience in a strong branded environment.”

As part of its restructuring, Hilfiger will close seven of its 18 Canadian specialty retail locations between May 31 and Oct. 31. The affected locations are Anjou and Rockland in Quebec; Promenade and Sherway Gardens in Ontario, and Market Mall, Chinook and West Edmonton Mall in Alberta.

In 2009, Hilfiger discontinued its Canadian wholesale women’s and men’s business to concentrate exclusively on the expansion of its retail business there. The company then integrated Tommy Hilfiger Canada and Tommy Hilfiger USA Inc., under the umbrella of Tommy Hilfiger North America, and restructured its personnel, putting Sheinbaum in charge of retail business in Canada, as well as the U.S.

Hudson’s Bay Makes Plans For An IPO

The Globe and Mail
By Marina Strauss

The venerable Hudson’s Bay Co., Canada’s oldest retailer, is taking another shot at going public.

Representatives of U.S. owner Richard Baker began talking to Canadian bankers this week about an initial public offering of 20 per cent of the parent company of retailers the Bay, Home Outfitters and, in the United States, the Lord & Taylor department store chain, according to sources.

Mr. Baker is looking at taking HBC public on the Toronto Stock Exchange with the possibility of a U.S. listing as well, sources said. The IPO, being timed for the fall, will likely attempt to raise about $500 million, industry observers predicted.

The move comes as the retailer’s flagship chain, the Bay, begins to enjoy signs of a turnaround under a new leader and a new strategy of stocking hipper fashions and home goods at a range of prices, many of them higher than previous ones, to draw a younger and more style-conscious customer.

Mr. Baker, a shopping centre developer who started to buy up retailers in 2006, paved the way for an IPO earlier this year by sealing a $1.8-billion deal with the U.S. discount chain, Target Corp.

It is picking up most of HBC’s underperforming Zellers stores with the goal of converting up to 150 of them into its own Target banner by 2013.

Now Mr. Baker is preparing to cash in further by giving a little piece of Canada back to Canadians.

Pressure

Still, many investors may be skeptical about betting on HBC. Faced with mounting competition from more nimble players, including discount giant Wal-Mart Canada Corp., it struggled to make headway as a public company until being taken private by another U.S. investor in early 2006.

In coming years, HBC will feel further pressure as Target and a growing array of foreign retailers set up shop here.

“In general I think the Street is going to be very suspicious about, in particular, the Bay’s ability to compete in a world that includes Target,” said Jim Danahy, managing principal at retail consultancy CustomerLAB.

Bonnie Brooks, the seasoned merchant who took the helm of the Bay in 2008, has made great strides in improving its flagship stores and raising the chain’s profile, Mr. Danahy said. But she still has a lot of work to do to revamp most of the 92 Bay stores, he said.

Mr. Baker, who wouldn’t comment on Thursday, has said he would use some of the proceeds of the Zellers sale to give the remaining Bay outlets a facelift.

His cost-cutting and investments so far seem to be paying off. With roughly $7-billion in annual sales, HBC rang up profit of about $450-million in 2010, before taxes, up from $330-million the previous year, according to a recent published report.

The Bay, with almost $3-billion in estimated annual revenues, saw its sales rise 4 per cent last year at stores open more than a year, its first increase in a decade. Lord & Taylor, the oldest U.S. department store retailer with 46 outlets, is performing even better than the Bay, industry insiders say.

Both chains made big changes after they were snapped up by Mr. Baker – Lord & Taylor in 2006 and HBC two years later. Shifting more high-end, the Bay dropped 900 slow-selling brands and introduced new ones such as Theory and Coach. It revived the upscale The Room at its downtown Toronto store and, at the other end of the spectrum, signed a deal with a British retailer to bring its cheap-chic TopShop fashion offerings to the Bay, starting this fall.

The Zellers Albatross

Antony Karabus, leader of retail consulting services at PricewaterhouseCoopers Canada, predicted that investors will be more interested in HBC now that it is unloading its Zellers stores, which competed head-on with Wal-Mart. “Zellers was an albatross around the company,” he said.

Investors prefer a “pure play,” in this case, essentially department stores rather than also discounter Zellers, Mr. Karabus said. “Contrary to popular rumours over the last 10 years that department stores have become irrelevant, the exact opposite is happening.”

Many department store chains, such as J.C. Penney and Macy’s, are enjoying a renaissance as they focus on popular brands as well as their own private labels, he said. And investors can also have confidence in the strong CEOs that Mr. Baker has hired at the Bay (Ms. Brooks) and Lord & Taylor (Brendan Hoffman, formerly at Neiman Marcus,) he said.

As well, Mr. Baker is beefing up HBC’s Fields discount chain, with a pilot in the image of a dollar store. Eventually, HBC will sell off Fields also, Mr. Karabus predicted.

HBC Retail Concept Gets Reformatted For U.S. Expansion

Globe and Mail
By Marina Strauss

As he mulls taking Hudson’s Bay Co. public this year, the U.S. owner of the iconic department-store retailer is turning his attention to a risky but potentially lucrative specialty-store expansion.

Richard Baker, a Purchase, N.Y.-based real estate heavyweight, will roll out HBC’s Home Outfitters chain by testing two new upscale home-goods stores in New Jersey starting in late summer. If successful, he will take the concept – dubbed Lord & Taylor Home after his U.S. department-store chain – farther afield in the United States.

It’s part of a wider strategy to capitalize on HBC’s core strengths in fashion and housewares by branching out into specialty-store retailing. The company intends to use some of the $1.8-billion-plus it got this year for selling its Zellers stores to U.S. titan Target Corp. to finance specialty-retail acquisitions and new concepts.

The strategy could face headwinds in the U.S. marketplace, where recession-battered consumers remain reluctant to spend and the housing market – which spurs home-goods purchases – is still under water for the most part. Nevertheless, the well-heeled shopper has recovered faster than others.

Mr. Baker knows better than most about gambling on U.S. home-goods merchandising. He was a minority investor in retailer Linens ‘N Things, which went into bankruptcy protection during the recession although it remained profitable in Canada. And he picked up the high-end home chain Fortunoff in bankruptcy only to see it collapse in the downturn.

Now he’s betting that the headway he’s made at HBC’s Home Outfitters and the Bay since he acquired their parent in 2008 will serve him well in new specialty ventures.

“We’ll incur these costs knowing there could be greener pastures,” said Fritz Winans, president of HBC’s specialty retail division. “Anything that we’re going to get into, we’re going to believe it’s going to have significant enough potential – otherwise we’re not interested in getting involved in it.”

Mr. Baker has enjoyed signs of improvement at his privately held HBC. Its 69 Home Outfitters stores turned a corner in 2009, moving into the black from red, Mr. Winans said. Same-store sales, which had been on the decline when the chain was purchased, rose in the single digits last year.

After years of struggle, the parent company more than doubled its profit in 2010 from two years earlier, thanks to cost-cutting and re-focusing on more profitable areas while winding down others, a spokeswoman said. Expenses also were trimmed at Mr. Baker’s upscale Lord & Taylor department stores..

Still, Mr. Baker faces stiff competition in specialty home goods, particularly in the U.S. northeast where rivals such as Crate & Barrel are well entrenched, said retail strategist Anthony Stokan of consultancy Anthony Russell and Associates. “There are several significant challenges in introducing any large-scale retail concept in the American marketplace right now,” he said.

The U.S. housing market is still soft, prompting less need for consumers to buy products for their homes, Mr. Stokan said. And it’s tougher for a retailer to gain traction by launching a new banner rather than acquiring an established player, he said. Lord & Taylor has built a solid reputation as a revitalized fashion brand, but will need to work at becoming a destination for home goods.

Despite the challenges, Mr. Baker is eyeing specialty retailing opportunities for future growth. The company revamped Home Outfitters in the past year, adding high-end brands such as Nespresso coffeemakers and, soon, Ralph Lauren bedding. It recently introduced a pet department, including beds and bowls for Fido, in response to burgeoning demand in that segment.

Within driving distance of New York City, the two test home stores will carry pricier brands as well as less costly private labels. If they take off within about five months, the company will expand them in the U.S. northeast and eventually across the United States, Mr. Winans said. Some industry observers envision more than 100 U.S. stores eventually.

Beyond Lord & Taylor Home, Mr. Baker is discussing internally other specialty retail opportunities, among them adopting formats from other countries and launching them in Canada, Mr. Winans said. He’s looking at both acquisitions and fresh rollouts for North America.