On a private jet en route to Florida, Richard Baker gives a glimpse inside his head.
“I can’t read a book,” the fast-moving, fast-thinking Hudson's Bay Co. chief executive says. Sitting still is clearly not his thing, though there’s no lack of focus for the jobs at hand.
In the days and weeks ahead, he’s opening a Lord & Taylor in Boca Raton, far from the store’s Northeast comfort zone; closing on the Saks Fifth Avenue deal and planning a real estate investment trust to help pay for Saks; working on sensitive management changes across his retail holdings, and thinking about synergies between his businesses to save money and create new experiences in the stores. It’s no wonder he can’t kick back for some leisure reading. Reading a contract? No problem.
With the Saks deal coming to a clean close, Baker’s plate of projects isn’t really any less full. Getting deals done? “That’s the easy part,” Baker says. It’s what comes after the deal—building a new team, consolidating and executing the business for growth—that’s hard.
In Richard Baker’s world, things swirl and move quickly. North America’s newest retail kingpin cooks up a cauldron of ideas and strategies, big and small. Colleagues say he’s hands-on, decisive, a quick study and moves from subject to subject. While some chief executive officers can go on and on in meetings, “with Richard, it’s 20 minutes and you’re out of there,” says a close associate.
“Richard is absolutely very hands-on. He’s learned it from the top down, but he doesn’t get involved in the open-to-buy,” notes one Hudson’s Bay merchant. “Oh, he’s everywhere,” adds a Hudson’s Bay Co. executive. “He’s called me right from the selling floor when he’s had an issue with a vendor.”
“Richard is high energy, aggressive, determined to make his mark, and he’s showing an emerging appreciation for what retail is all about,” says one retail president who competes against Baker.
Baker’s approach, critics suggest, has been to throw it all against the wall and see what sticks. Investments in Fortunoff, Linens-N-Things and Creative Design Studio, a designer and private-label incubator that he created, proved to be flawed strategies and those businesses disappeared. The Great Recession didn’t help. An idea to have associates dress up as elves and distribute Christmas coupons by the Stamford, Conn., train station never materialized, fortunately. And he spent hundreds of thousands of dollars on plans to build an office tower atop the Lord & Taylor flagship, only to abandon the project to focus on the retail business itself. Opening the Lord & Taylor flagship on Thanksgiving Day last year triggered controversy and a chain reaction, pushing Macy’s and Penney’s to do the same this year.
“He seemed to pull these extraordinary ideas from the sky,” recalls a former L&T worker. When he bought L&T in 2006 for $1.2 billion, “He had this excitement and fearlessness to throw out these ideas… but I believe he has learned from his mistakes. He’s taken a step back and has surrounded himself with people who know.”
Critics aside, what can’t be denied is that Baker’s string of deals—Lord & Taylor, then Hudson’s Bay for $1.8 billion, and Saks for $2.9 billion—were shrewd and strategic, structured with various partners including a Middle Eastern sovereign fund, Bill Mack, Baker’s father Robert, Lee Neibart and debt that would be paid down through clever real estate transactions. He’s unlocking hidden values, potentials and synergies in a retail portfolio containing prime real estate. And unlike other retail investors and private equity firms, he’s never been accused of overpaying, other than by his father.
In just six-and-a-half years, Baker has cobbled together a $7 billion North American retail empire comprising venerable nameplates, and his aggressive buying spree has the industry taking notice. He’s breathed new life into the businesses and made capital improvements, and while having driven out some executives, he recruited former Lane Crawford ceo Bonnie Brooks, a native Canadian, who has professionalized the Hudson’s Bay business by reducing the vendor matrix and adding quality to the mix. Curiously, she shifted from being president over L&T and Hudson’s Bay to vice chairman advising Baker on strategy.
“The truth is, back in 2006 when we bought Lord & Taylor, we were intrigued by the real estate. But once we got more involved, Richard saw the benefits of the operating business,” says his partner Neibart, who came to Boca for the L&T opening. “Richard is a very careful, probing ceo. He’s also good at making things fun.”
At the Boca Raton Resort & Club, Baker hosts a dinner party celebrating the new Lord &Taylor with his wife Lisa; Neibart and his wife; Nina Garcia; Joseph Abboud; Mark Badgley; James Mischka; Liz Rodbell, the incoming president of L&T and Hudson’s Bay succeeding Brooks, and a dozen or so senior members of this retail team. The turnout shows this is no ordinary store opening. It’s a test of Baker’s ambition to expand Lord & Taylor, and ability to put up an attractive store. In his welcoming remarks, Baker salutes the store manager for the great job she’s doing, and says the new Lord & Taylor has the look of a Barneys and the prices of Macy’s. He banters aloud with Don Watros, his right-hand man and chief operating officer who does the streamlining work, of which there has been plenty recently.
Clowning for a moment, Watros gives Baker a chance to show his retail acumen by asking him to guess the volume for the opening two hours in Boca. “With all my years of retailing,” Baker says facetiously, “I’ll say $30,000.” Baker passes the test. The actual take: $32,000, Watros says.
Despite his rapid retail buildup, Baker still seems one step outside “the retail club.” He’s been dogged by skepticism that he’s qualified to be ceo of a big retail company since he grew up in his father’s real estate business developing shopping centers, and not through the merchant ranks. “I don’t get that anymore. It’s over,” Baker says in an interview, dismissing any concerns. “I’m not a merchant. I’m an operator of a $7 billion retail business with a very strong team of presidents, operators and merchants. To be a ceo of a $7 billion world-class retail company, I didn’t have to be men’s coat buyer in some point of my career.
“It’s all done. It’s over,” he reiterates. “I think this is a very mature, well-thought-out strategic operation.”
His being 48 and a decade or two younger than most other major retail ceo’s, and the fact that he’s less inclined to show up on the industry’s extensive rubber chicken circuit, further sets him apart.
Baker also dismisses those who think he’s in the retail business to cash in on, or redevelop, the real estate portion. “From the beginning, we always had a philosophy that you run a retail company with three core expertises: one, being a great operator; two, having strong real estate expertise, and three, a strong core competency in mergers and acquisitions.”
Think about Macy’s or Target, he suggests, noting they’ve grown successfully by having the same core competencies. “Frankly, we are just executing our plan to maximize the real estate value, maximize store operations and acquire businesses. There was never a plan for a Lord & Taylor conversion” from retail into something else, aside from designing an office tower atop the roof.
Business has been in his blood for a long time. In high school, he formed a catering company and hired students to help him with bar mitzvahs. Later, he went to Paris for culinary school without knowledge of French. He studied at the Cornell School of Hotel Administration and thought about starting a restaurant. His father, founder of National Realty & Development Corp., a large owner of shopping centers in the U.S., persuaded him to join the family business. Young Baker had an impact on the business, including being instrumental in bringing Wal-Mart to the East Coast to the family’s centers.
Years later, Baker went out on his own by forming a fund to buy businesses. The idea came from his wife. “We were out with a bunch of friends in the private equity and hedge fund business, and later my wife told me that I was just as good as those guys and I could do just what they were doing. I woke up the next morning and said to myself, maybe she’s right.”
In 2005, he formed NRDC Equity Partners and pursued Toys ‘R’ Us, Burlington Coat Factory and A&P unsuccessfully. He ended up taking a minority stake in Linens-N-Things. “That didn’t work out very well in the end. I invested a small amount of money.” He was given a seat on the board, but after one meeting he quit. “I could see that I was not going to have any impact. What’s my takeaway? That I really needed to be in control, that I wouldn’t invest and have a back seat. If something is going to go bad, I want it to be because I made bad decisions.” Now, he says, “I spend all of my time only on HBC” and not dabbling in other investments.
“I’m clearly an entrepreneur. I started in business at a young age,” Baker says. “The first chunk of my career was developing real estate. I like building businesses. We are building a world-class retailer. We have just begun. We are sitting on top of arguably some of the greatest department stores in the world. We’re not sellers. We’re not traders. We’re not chopper-uppers. We are building a business.”
He says he’s bringing in people who are “aggressive, willing to push the envelope and think outside the box. I look for people who do all of the things I can’t do.” Marigay McKee, the chief merchant at Harrods, who joins Saks in about a month, fits the description.
“I think I get involved in the very big picture and very little details, not in the middle,” Baker says of his management style. “What brands are we going to sell, what people are getting hired, I want to understand that. The execution in the middle, we have people for that.”
With Black Brown 1826, HBC’s successful men’s private brand designed by Abboud, Baker tries on the samples and goes home wearing them, to test the fit, and to the bemusement of his family, who see him in sweaters still pinned in the back. That’s part of what he considers an unorthodox approach as a retail ceo. He’s not thinking about future fashion trends, or trying to dictate to the consumer. “I always take the point of view of the customers. I spend a lot of time visiting stores. I am very focused on the customer experience.”
“What I really like about this business is that it is purely an intellectual exercise at this point,” Baker says. “Most of our competition is in place. The U.S. is pretty much built out. The chessboard is set. This is not about rolling out a big new chain. It’s how well we play with the pieces we’ve got. That’s the most exciting part.
“The part I hate most is that there’s this unfortunate reliance on the weather. You could do everything right and if the weather is wrong, you lose. If you stink as a retailer and the weather is right, you can do just fine.”
What are his criteria for buying retailers? “Heritage brands with a real estate component and highly focused on either luxury, the midtier or off-price.” Also, if you buy cheap enough, even department stores can be money makers.
His interest in Saks dates back to 2006, right after he bought L&T. “We thought there could be a lot of synergies.” In 2010, the interest grew when he felt there was room in Canada for Saks. “In April, I picked up the phone and called Steve,” meaning Stephen Sadove, the former Saks ceo. “I said, ‘Would you be interested in selling Saks?’ and he said, ‘We’re always happy to talk.’”
Now that Baker owns Saks, there’s been speculation the Hudson’s Bay store on Bloor Street in Toronto, only a few blocks from Holt Renfrew, could convert to Saks. Baker won’t specify any Canada locations at this point.
Outside the business, Baker and his family are philanthropic and have taken special interest in Ethiopian Jews living in Netanya, Israel. His kids donated money from their bar mitzvahs to create a graphic-arts classroom and fund a bar mitzvah celebration for Ethiopians. One time, the Bakers brought a group of Ethiopian boys from Netanya to visit New York, which included some shopping at Lord & Taylor where the boys, unaware of the dressing rooms, started trying on clothes in the aisles. After attending the closing ceremony of the Vancouver Olympics, the Bakers rushed to catch a 2 a.m. flight to Tel Aviv, where the very next day, they met with Shimon Peres, Israel’s president, in a hotel suite to be congratulated for Baker’s support in Israel.
The ceo can also make business a family affair. He had his kids in his office on a Sunday to witness his signing of the deal to buy Saks.
The Bakers have a collection of contemporary art installations. In the barn of their 10-acre Greenwich, Conn., estate, there’s an indoor pool, computerized to change colors, created by artist James Turrell. Baker has also commissioned works by artists such as Leo Villareal. “I have a creative streak, whether it’s cooking or working with artists,” Baker reflects. “We live in a world where everybody is taught to think the same. That one and one is two. That red and yellow makes orange. What I love about artists is that they think differently and that they get rewarded for that and revered for that. I hope people think more like artists and less like you learn in school.”
It’s a bit like Baker creating his own retail canvas.
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