Liquidation sales remain on hold at Hudson’s Bay as it continues discussions with landlords and lenders to determine the company’s next steps. The 355-year-old retailer was granted protection under the Companies’ Creditors Arrangement Act (CCAA) on March 7 while seeking financing to stay afloat. Initially, the company aimed to keep nearly half of its 80 department stores open. However, after failing to secure the necessary funds, it now faces the full liquidation of its stores, along with three Saks Fifth Avenue and 13 Saks Off 5th locations in Canada.
The development has put over 9,300 employees at risk. Earlier this week, the company requested court approval to begin liquidation sales at its stores and distribution centres, while simultaneously exploring potential buyers who could salvage part or all of the business. Lawyers for Hudson’s Bay stated that if a buyer emerged, some stores could be removed from liquidation. However, liquidation sales cannot begin until the court grants approval, which could happen in the coming days.
Legal Challenges and Landlord Disputes Delay Liquidation Approval
At Monday’s court hearing, multiple parties objected to aspects of Hudson’s Bay’s restructuring process, including landlords such as RioCan REIT, one of the company’s joint venture partners, and other creditors. Ontario Superior Court Justice Peter J. Osborne urged all stakeholders to temper their disagreements and negotiate a temporary resolution.
On Wednesday, Ashley Taylor, a lawyer with Stikeman Elliott LLP representing Hudson’s Bay, told the court that negotiations were ongoing and that all parties were “acting in good faith.” The company was granted an extension until Friday to continue discussions. However, Hudson’s Bay is expected to reapply for liquidation and sale approval at that time or even earlier, depending on negotiations.
Customers Rushing to Redeem Gift Cards as Sales Remain on Hold
Shoppers have already increased foot traffic at Hudson’s Bay locations, hoping to find early discounts. While deep clearance sales have yet to begin, customers are using their gift cards amid concerns they may become invalid. The company announced that approximately $24.1 million worth of gift cards remain outstanding, with an expiry deadline set for April 6.
In addition to gift card redemptions, signature Bay items such as the iconic striped wool blankets have been selling out, and in some locations, even display merchandise like hanging canoes have been sold off. Meanwhile, the e-commerce site TheBay.com will continue operations for a limited time to help clear inventory.
Industry Experts Weigh In on Hudson’s Bay’s Future
Retail analyst Carl Boutet suggests that the court is proceeding cautiously, ensuring that all stakeholders have time to explore alternative solutions. “Once liquidation starts, there’s no turning back,” he noted. “Creditors and landlords are hoping for a last-minute solution, but those options remain extremely limited.”
Boutet also highlighted the interest in Hudson’s Bay’s intellectual property (IP), but not necessarily its department store operations. “There may be value in the brand name, but reviving the store model under its current structure is highly unlikely,” he said.
He further emphasized that Hudson’s Bay’s extensive real estate holdings could present an opportunity for investors, but the challenge lies in repurposing the retail spaces. “These are large, multi-level stores in prime locations, but their utility as traditional department stores has diminished. The question is whether landlords will repurpose them for mixed-use developments, luxury retail, or other commercial ventures.”
Boutet also noted that a failure to secure an investor could set a precedent for other struggling Canadian retailers. “The demise of Hudson’s Bay would signal the challenges of legacy department stores in a changing market. Other retailers facing similar struggles will be watching closely to see how this unfolds.”
Why Did Hudson’s Bay Collapse?
Hudson’s Bay’s financial struggles stem from multiple factors, including e-commerce, growing competition from discount retailers, and economic pressures such as inflation and high interest rates. The COVID-19 pandemic also impacted brick-and-mortar retail, leading to months-long store lockdown closures and lasting damage to consumer spending habits.
However, the company also faced internal challenges. Its acquisition of Saks Fifth Avenue required significant investment, drawing resources away from its Canadian operations. Cost-cutting measures led to deteriorating store conditions, including non-functioning escalators and elevators, HVAC issues, a lack of in-store music and reduced staffing. Additionally, a failed attempt to spin off its e-commerce business created operational inefficiencies.
Last year, Hudson’s Bay was formally separated from Saks Global when parent company HBC purchased Neiman Marcus, transferring valuable U.S. assets out of the Canadian business. Left as a standalone entity, Hudson’s Bay was burdened with $1.1 billion in debt and struggled to secure financing.
Can Hudson’s Bay Survive What’s Next?
The retailer hopes a buyer will emerge who can rescue part or all of the business. Any potential investor would need to settle Hudson’s Bay’s debts, including over $400 million owed to secured creditors, and commit to revitalizing the chain. However, time is running out. If a sale does not materialize soon, liquidation will proceed, and the company’s historic legacy may come to an end.
Hudson’s Bay is expected to return to court on Friday, at which point a final decision on liquidation sales may be made. While companies like Hilco Global are reportedly ready to manage the liquidation process, stakeholders are hoping for a last-minute investor to step in. If liquidation is approved, clearance sales could last up to 12 weeks.
