Store Renovation Money For The Bay To Come From IPO

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Canada’s Hudson’s Bay Company (“The Bay”) is seeking about $400-500million to further upgrade its stores and merchandise strategy, as well as pay off debts. The retailer will raise fund via an initial public offering (IPO) in mid November 2012, via the Toronto Stock Exchange (TSX).

The $400-500million represents about 20% the value of the company. The Bay has just released financials, and sales are doing well enough that ‘now is the time’ for them to raise further funds to invest into further store improvements as well as for hiring more sales staff. Some also speculate that The Bay is looking to do some ‘cashing out’ before the Canadian entry of Target and Nordstrom stores.

Per square foot revenues for The Bay were only about $133/square foot in 2011. The store would like to see that increase that to $170-180/square foot in three-to-five years, with substantially higher numbers expected for its downtown flagship stores (Toronto, Montreal, Vancouver and Calgary). 

The Bay currently has 90 department stores across Canada. About 80 of these stores will see substantial renovations from some of the proceeds of the IPO. The other 10 stores may be ‘let go’ for lack of productivity. These locations have yet to be announced and will likely be closed slowly by lease expiry or with sublease agreements with other retailers. 

We will keep you updated on The Bay’s stock offering, as it might actually be a decent investment… the company is doing ok and owns substantial real estate holdings.

Hudson’s Bay Company website: www.thebay.com
Toronto Stock exchange website: www.tmx.com

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