Hudson’s Bay Amps Up Spending for Growth

The owner and operator of Hudson’s Bay and Lord & Taylor expects to spend $180 million annually on capital expenditures over the next five years.

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Hey big spenders: Count Hudson’s Bay Co. as part of the club.

This story first appeared in the March 27, 2013 issue of WWD.  Subscribe Today.

The $4 billion Toronto-based owner and operator of Hudson’s Bay and Lord & Taylor sees spending $180 million annually on capital expenditures over the next five years, joining Macy’s, Nordstrom, Neiman Marcus and Belk in a widening field of retailers getting capital-intensive.

“We are spending in a very healthy way,” Richard Baker, the chief executive officer of Hudson’s Bay Co., told WWD in an exclusive interview Tuesday on where the company is investing. “We happen to have a lot of good new projects. You want to spend money on things that improve the store and get a healthy return.”

At the Queen Street flagship in Toronto, Hudson’s Bay will develop a 20,000-square-foot Kleinfeld Bridal salon, seen opening in early 2014. Canada’s largest shoe department — 30,000 square feet — is scheduled for a fall 2013 debut at the Queen Street flagship.

Also on tap:

• Five additional Topshops opening this fall in Hudson’s Bay locations across Canada, bringing the total to 11. The company started opening Topshop/Topman in-store shops in 2011.

• Re-platforming thebay.com Web site in the second quarter of this year.

• Overhauling Hudson’s Bay on Bloor Street in Toronto, which strikes a stark contrast to the Queen Street flagship. It’s a tired, anemic store and other retailers have been interested in taking over the site. But Baker told WWD he’s not giving it up and that he’s cooking up plans to revive it.

• At the 650,000-square-foot Lord & Taylor flagship on Fifth Avenue in Manhattan, a two-level, 100,000-square-foot men’s store is seen opening this September, doubling the space for the category. Men’s will be on the ninth and tenth floors. The flagship previously reworked the main floor and touched up a few others at a cost of $25 million, and is now engaged in a two-year, $40 million renovation involving several more levels.

Lord & Taylor will also open an 80,000-square-foot store in Mizner Park, Boca Raton, Fla., this September, marking its first full-line reentry into Florida after pulling out of the state ten years ago. Lord & Taylor does have a two-year-old outlet in Dolphin Mall in Miami.

Generally, retailers have been hesitant to make major capital outlays since the Great Recession, though that’s changing. After stowing some cash, seeing consumers slowly start to shop more and watching their stores get worn out, retailers are starting to spend selectively on projects revolving around omnichannel and international initiatives and renovations.

Nordstrom, which has $12 billion in annual revenues, is prepared to spend significantly to open a Manhattan flagship on 57th Street in 2018, and even sooner enter Canada with full-line stores and Rack outlets starting in fall 2014 with a unit in the Chinook Centre in Calgary, which will be followed by three other full-line locations in Canada. Nordstrom will also accelerate its direct and mobile operations and over the next five years practically double its capital expenditures to $3.7 billion.

The $28 billion Macy’s has capital expenditures set at $925 million for this year, largely for the multiyear total overhaul of Macy’s Herald Square, as well as ongoing omnichannel and localization efforts.

The $3.8 billion Charlotte, N.C.-based Belk is investing $600 million over five years, from fiscal 2012 forward, to build up its network of flagships, expand in Texas, grow Internet sales and drive the total business to $6 billion in revenues.

The Neiman Marcus Group has $135 million in capital expenditures set for its fiscal year, largely for Bergdorf Goodman where 40 projects (big and small) are in the works, and for Neiman Marcus on Michigan Avenue in Chicago, among other stores.

“We are right there with them,” Baker said, when asked how Hudson’s Bay’s outlay, as a percent of the revenues, compares with the competition’s.

Hudson’s Bay Co., which began trading on the Toronto Stock Exchange last November, has attained the exclusive rights to the Kleinfeld brand in Canada. Baker said brides will have access to expert bridal consultants and to the same American and European labels available at Kleinfeld’s 35,000-square-foot store at 110 West 20th Street in the Chelsea section of Manhattan, including Pnina Tornai, Kleinfeld’s top-selling designer, as well as Mark Zunino, Dennis Basso and Isaac Mizrahi. Prices start at $2,500, but Kleinfeld’s has sold gowns as high as $80,000. In Canada, prices will open at $1,500 to $1,800.

Kleinfeld Bridal is considered the world’s most productive bridal site but it’s not as productive as some other luxury stores, since it requires greater non-selling space to pamper clients. Founded in 1941, Kleinfeld is owned by Ronald Rothstein, Mara Urshel and the actor Wayne Rogers, who starred in the TV show “M.A.S.H.” The deal with Hudson’s Bay does not change the ownership. Kleinfeld is host to the TLC show “Say Yes to the Dress.”

People definitely know the Kleinfeld name in Canada,” Baker said. “The TV show is very popular in Canada and Kleinfeld has a pretty substantial Canadian clientele. There is one location. We will be their second location.” While Hudson’s Bay does have a bridal registry, “We do not presently have a wedding-dress business,” Baker noted. There are no plans currently to open additional Kleinfeld locations, though Urshel cited the Hudson’s Bay sites in Vancouver, Calgary and Montreal as possibilities, provided Toronto is successful.

The Kleinfeld Bridal salon at the Hudson’s Bay, which HBC is paying to build and staff, will be on the seventh floor, taking over office space where there is a terrace and skylights to enhance the ambience. “We will be merchandising the store and training the staff,” which will have 50 to 70 people, Urshel said. “It will be a total freestanding unit, with a separate alterations department. This is something that no department store has ever undertaken, to build an incredible bridal store within a store.”

Asked why Kleinfeld’s didn’t ink a deal with an American retailer, Urshel responded, “Not that many stores in the U.S. have the real estate availability. Saks closed its bridal. Neiman’s closed theirs, and the departments they closed were tiny. In bridal, you really have to believe in the business and you have to service it.”

The Queen Street flagship has 1 million square feet, is considered the second-largest store in North America next to Macy’s Herald Square and has been undergoing significant renovations since 2009. “We have plenty of room for a variety of initiatives,” Baker said. “We are spending substantial money this year and next year to continue renovating that building.” That includes expanding and relocating women’s shoes from the second to the main floor, and expanding men’s wear on two and on the concourse. Home was downsized and moved off the concourse.

Hudson’s Bay is talking to other brands about future partnerships. “We are very flexible,” Baker said. “We do all types of different arrangements. We do licenses, leases, shop-in-shops — whatever needs to be done.” Uniqlo is said to be among the brands approached. “No comment,” Baker said, responding to the speculation.

In other news, Hudson’s Bay has been undergoing a re-branding. Stores are now all called Hudson’s Bay, instead of The Bay, and all advertising, packaging and in-store signage have been converted. The Web site continues as thebay.com. The logo bears the coat of arms, redrawn by Canadian artist Mark Summers and with a sleek design created by David Lipman, the advertising guru.

The Hudson’s Bay name, Baker said, is “more in keeping with the heritage of the Hudson’s Bay Company. It’s both historic and modern at the same time, and more consistent with what the customer thinks of our store. Calling it The Bay is like calling Bloomingdale’s ‘Bloomies’ or Neiman Marcus ‘Neiman’s.”’


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