Shares of retailer Hudson’s Bay Co. (TSX:HBC) were up 2.3% in early afternoon trading on October 24 after the company announced it had sold its 5th Avenue store for $850 million. The sale comes just days after the announcement that CEO Gerald Storch would leave the company as of November 1. A veteran in the retail industry, the departure of Storch appears to have telegraphed that the company will pursue a different path.
Hudson’s Bay has been under tremendous pressure from an activist shareholder to make the most of its valuable real estate holdings as its retail business has suffered a number of setbacks. Storch was adamant in a recent meeting that selling off locations could be a slippery slope into decline. The turmoil comes as other retailers are suffering in this new environment.
Sears Canada recently announced that it would close its doors which will cost over 12,000 jobs. Toys “R” Us also declared bankruptcy, a company which Storch previously helmed. With department stores in crisis retailers are exploring other options.
Hudson’s Bay finds itself in a complicated position. This sale should alleviate some pressure temporarily but shareholder Land and Buildings has been pressuring leadership to monetize its real estate holdings. It has suggested the establishment of third party boutique retailers and development of condominiums on the higher floors of its Saks 5th Avenue location.
Investors will have to wait to find out whether this sale is a sign of a more dramatic transformation going forward or a move to free up cash while the company attempts to reorient its retail business.
