Hudson’s Bay in Li & Fung Deal

The Hudson’s Bay Trading Co. beginning next year will utilize Hong Kong-based global consumer goods exporter Li & Fung Ltd. as its sole sourcing agent.

The Hudson’s Bay Trading Co. beginning next year will utilize Hong Kong-based global consumer goods exporter Li & Fung Ltd. as its sole sourcing agent for the Zellers, The Bay, Home Outfitters and Lord & Taylor divisions.

This story first appeared in the December 9, 2009 issue of WWD.  Subscribe Today.

“Li & Fung will bring design, technology and market expertise and expedited shipping to the Hudson’s Bay Trading Company,” said Jeff Sherman, chief executive officer of HBTC. “We really want to focus on our customers, our stores, our marketing and branding” by simplifying the sourcing approach.

“Aligning ourselves with the leading global sourcing agency gives us access to the world and to a company that is knowledgeable on a country-by-country basis, globally, on product design and where the economic advantages are,” Sherman said. “Li & Fung can better service our sourcing needs.”

The move is expected to save HBTC costs via a partnership with one sourcing company instead of several around the world. HBTC has been doing much direct-to-factory sourcing on its own while also working with sourcing agents around the world.

The partnership with Li & Fung also reflects HBTC’s efforts to consolidate functions over the last couple of years through its shared services group.

Sherman added that Li & Fung “will source predominantly private label, but if there are people who do business with Li & Fung on a brand level, it works to our advantage.”

Overall, HBTC has been increasing its private label offerings, particularly at Zellers, but there is also a strategy to resurrect heritage and signature items, mainly at The Bay. Sherman said Li & Fung’s sourcing efforts will be significant in both cases and generally across all merchandise categories.

Asked if the arrangement with Li & Fung would lead to layoffs at HBTC’s sourcing teams, Sherman replied, “This is not a displacement story. Our sourcing teams were never big.” He added that he didn’t know the actual headcount and that the company is “working through how many people we will keep on” and how many might become Li & Fung employees.

“With our strong network of offices in over 40 economies, we are confident that we will be able to contribute to the long-term success of Hudson’s Bay Trading Company in North America,” said Bruce Rockowitz, president of Li & Fung, which has more than 80 offices in 40 economies.

Li & Fung is among the biggest sourcing companies in the world, with a long history of working with firms such as Limited Brands Inc., Macy’s Inc., Forever 21 Inc., Liz Claiborne Inc. and, more recently, The Talbots Inc.

In January, the Toronto-based Hudson’s Bay said it was centralizing the back office functions of its divisions under a shared services group designed to provide finance, IT, supply chain and logistics and central operations to all banners and businesses. A month later, the company eliminated 1,000 positions, or 5 percent of its workforce, to offset declining business conditions and save $150 million annually. Hudson’s Bay is North America’s oldest retail brand, founded in 1670.