Hudson's Bay to liquidate all but 6 stores starting Monday
Flurry of sales allows some stores in Ontario, Quebec to stay open — for now
After a week spent seeking a lifeline, an Ontario court has given Canada's oldest company permission to start liquidating all but six of its stores on Monday.
The Friday approval from Ontario Superior Court Judge Peter Osborne allows the retailer to begin selling off inventory at most of its 80 Hudson's Bay stores, three Saks Fifth Avenue locations and 13 Saks Off 5th shops in Canada.
"This is the art of the possible, and we are where we are today. In my view, there is no other alternative," Osborne said Friday.
The six stores being saved from the liquidation sale include a flagship location on Yonge Street in Toronto, as well as a store in the city's Yorkdale Mall and another farther north in Hillcrest Mall in Richmond Hill, Ont. The remaining three are in Montreal, the Carrefour Laval mall and Pointe-Claire, Que.
The company didn't say how deep discounts will be during the liquidation, running until June 15. It will vacate all liquidating stores by June 30.
But the move to save six locations could save some of the 9,364 jobs that would have been lost had the company needed to liquidate all of its stores, which was the plan until recent sales exceeded expectations.
"If a solution can be found, there is an opportunity to pull additional stores out of the liquidation. But if a restructuring solution is not found very quickly, [the six] will be added to the liquidation sale," Hudson's Bay lawyer Ashley Taylor said in court on Friday.
The ruling marks a glimmer of hope for the company, which filed for creditor protection on March 7. The request showed the company was facing significant financial challenges and was desperately in need of cash to keep making even basic payments that sustain the business.
While the retailer suffered from reduced consumer spending, trade tensions between the U.S. and Canada and a post-pandemic slide in downtown store traffic, Hudson's Bay deferred payments to landlords and suppliers and eventually had to resort to seeking financing, which pushed it toward liquidation.
The possibility of the 355-year-old company disappearing triggered a flurry of sales in recent days from customers looking to snap up apparel, home goods and Hudson's Bay's famed point blankets which date back to 1779, when the fur trade was in full swing.
Earlier this week, its Toronto flagship location on Queen Street West was close to selling out of items bearing the brand's iconic green, red, yellow and indigo stripes. Sales were so strong between March 8 and 14 that the company made $21 million, beating its own estimates by about $7.4 million, court documents show.
The cash from the sales will allow the company to pay a joint venture with RioCan Real Estate Investment Trust, through which it owns some real estate, up to $7 million monthly in rent. It can now also pay back $16 million in financing it received from Restore Capital earlier in the month to keep it afloat.
Taylor said Friday the company will continue to "work hard" to find a "more long-term solution" for its financial woes, but warned the window to achieve this "remains very short."
While the company carries out the work, it will start a sales process for assets such as its leases and Canadians will see deals at stores set to be gutted.
Whether they shop in person or online, they will find Hudson's Bay has paused its loyalty program, which has 8.2 million Canadian members with about $58.5 million in unused points. It will stop accepting the $24.2 million outstanding gift cards consumers have after April 6.
All sales will be final at the liquidating stores, Hudson's Bay says.
Road to judgment
To arrive at a judgment, Osborne had to reconcile how the company could liquidate its inventory, pursue more financing and also seek a buyer for valuable assets, like its leases or even the intellectual property associated with its name or striped products.
"I want to make sure we haven't sold the jewels in the crown … so to make a better outcome impossible," he said in court earlier this week, hours before he reserved his judgment for the day and urged the lawyers he had heard from to "lower the temperature."
The dozens of lawyers at proceedings over the course of the week represented everyone from unpaid elevator companies to landlords.
The property owners worried a liquidation wouldn't just leave their malls and properties with enormous spaces to fill, but would also hamper foot traffic to other tenants whose wares would become less attractive when compared to the Bay's reduced prices.
Lawyer Taylor used his appearances to promise Hudson's Bay would "cast the net as wide as possible" to find backers who could salvage or rebuild the business.
He said earlier this week that it had approached 19 lenders, but so far, "the company's efforts have failed," necessitating liquidation.
Staff stare down possible job losses
Despite six stores being saved from the liquidation sale, for more than 9,000 employees on the company's payroll, the closure of stores will have deep consequences.
"I will be 62 in May and my plan was to work till 65 and retire, but it looks like that's not going to happen," said Kevin Grell who works as an e-commerce processor at the Scarborough online distribution site.
"It is sad. Especially at my age, it is difficult to get a job," he said. "Everybody's worried, everybody's sad, some of them are angry, which is understandable. They just can't believe it happened."
As the situation currently stands, staff could see their jobs disappear in a matter of days or weeks, depending on how fast the company moves. Many have no idea whether they will hang onto their pensions and benefits, or even receive severance.
Grell, who is a union steward, said they had a meeting with the union last week and asked about severance.
"They came out and honestly told us that in situations like this, don't expect the severance, because it's at the bottom of the barrel … so it's very unlikely we'll get anything."
Andrew Hatnay, a lawyer representing employees, repeatedly told the court he felt the entire process was moving too quickly because the company moved from creditor protection to a full sell-off in roughly a week.
He said he didn't see the saving of the six stores as reason for celebration.
"We will see how this works out but even … if they pull something out of their hat, stores are still going down," he told court. "That is not a good news story."
At stake, he said, were not just thousands of jobs, but benefits, pensions and severance. There are 21,000 past and present employees spanning Hudson's Bay, Saks Fifth Avenue and earlier acquisitions Simpsons, Kmart Canada and Zellers in the pension plan, which court documents say is currently fully funded.
Employees say they are not expecting severance, which Hatnay estimates could have amounted to a collective $100 million.
"This is melancholy," he told the judge. "This is the demise of HBC, slowly but surely."
With files from the CBC's Sophia Harris
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