exterior view of the Lord & Taylor flagship store on Fifth Avenue in Manhattan, New York

It’s a sad day for America’s oldest department store.

The iconic Lord & Taylor flagship on Fifth Avenue, a stalwart of American fashion design for generations of shoppers and a sentimental favorite among Christmas window gazers, will shut down by the end of this year.

The decision to close the 650,000-square-foot, 11-level flagship, while disappointing, wasn’t surprising, considering for several years it has been suffering from a dated image, declining traffic and poor productivity.

Its fate seemed practically sealed last October, when its owner, the Hudson’s Bay Co., stated it was selling the building to WeWork for $850 million, as part of HBC’s ongoing strategy to monetize real estate holdings to deleverage debt and improve profitability. The company is currently seeking to sell its big Hudson’s Bay flagship in Vancouver and lease it back.

The Lord & Taylor deal with WeWork ultimately triggered speculation that the flagship would close, despite HBC initially saying it would maintain a downsized Lord & Taylor on Fifth Avenue of about 150,000 square feet, which would have required paying rent to WeWork.

“HBC would never have been able to pay market rent on Fifth Avenue,” said one New York retail executive. “Macy’s and Bloomingdale’s I am sure are very happy about this decision.”

Officials confirmed Tuesday it would close the flagship by the end of this year, and also said that up to 10 of the 48 Lord & Taylor stores currently operating would close through 2019.

About 800 associates will be impacted by the Fifth Avenue closing, according to a spokeswoman. “Regular full- and part-time associates will receive appropriate employment separation packages in accordance with our policies. We intend to find as many transfer opportunities as possible,” she said.

Lord & Taylor has been a laggard within the HBC portfolio of retail banners. Saks Off 5th and European operations including Galeria Kaufhof in Germany have also been performing poorly. On the other hand, executives are satisfied with performances this year at the Saks Fifth Avenue and Hudson’s Bay operations.

On Monday, HBC said it was selling Gilt Groupe to Rue La La for an undisclosed price. Gilt has also been a weak performer.

While the Lord & Taylor flagship has been a let-down, it’s not indicative of all the Lord & Taylor stores. There are some healthy branches in suburban locations, such as those in Manhasset, Garden City and Scarsdale, N.Y., which have loyal followings.

Still, the flagship’s productivity has been well below other New York City retail flagships. According to sources, it generates a dismal $100 a foot on the upper floors, and around $200 per foot on lower levels. In its better days, the location generated about $120 million in annual sales, but is believed to have sunk under $100 million currently. It represents less than 10 percent of Lord & Taylor’s total volume.

Ironically, the demise of Lord & Taylor on Fifth Avenue comes at a time when the city is undergoing a renaissance in the flagship phenomenon. Bloomingdale’s recently completed a transformation of its home and footwear floors and is working on modernizing its ready-to-wear floors. Saks Fifth Avenue, a division of HBC, last month opened a new beauty floor on its second level and is recasting floors for fine jewelry and leather goods, as part of a sweeping overhaul of most of the flagship.

And new flagships are coming to town, including Nordstrom, which is scheduled to open a 320,000-square-foot women’s flagship on 57th Street and Broadway in the fall of 2019, and Neiman Marcus, which is scheduled to launch its first New York City location, a 190,000-square-foot store in Hudson Yards on Manhattan’s West Side in March 2019.

With tourism back on the rise and the national economy growing, New York retailers are positioned for gains. However, Lord & Taylor has been mired in its less-than-desirable location, somewhat removed from the more vibrant and trafficked retail stretches in Midtown and in Herald Square. Lord & Taylor’s immediate area lacks upscale retailers, and over the last three decades has seen other major department store departures, namely B. Altman and Ohrbach’s, which were both on 34th Street, as well as Gimbels which was on 33rd Street by Sixth Avenue.

“[Lord & Taylor] should have moved to a smaller space uptown in the late Seventies or early Eighties rather than staying on 39th Street,” said one retail source. “They just didn’t change with the times and let themselves die in a really bad location. The store was always too big to just be apparel and accessories without big-ticket items like home and furniture. It was a crazy waste of space.”

“L&T was truly one of the greats and in recent times should have been focused on the American designer businesses. That was their heritage,” said Joe Cicio, who started his career at Lord & Taylor and went on to Macy’s.

“Unfortunately like most larger retailers today, most stand for very little. Most house just a lot of stuff,” Cicio said. “They are chasing all the wrong things to stay above water. Instead of focusing on opportunity they seem to focus on what they perceive as competition.  I learned years ago that it is all about people. If you have the right talent you will have success. If you don’t, you don’t. My career started in the basement of that location. I thank god constantly for great timing and the opportunity to work and learn from some of the greats in the merchandising and retailing business there.”

HBC revealed the planned closure of the L&T flagship as the group reported a net loss of 400 million Canadian dollars, or $308 million, for the first quarter ended May 5, compared to a loss of 221 million Canadian dollars, or $170 million, in the year-ago period. HBC’s department store group, which includes Hudson’s Bay, Lord & Taylor and Home Outfitters, saw comparable sales decrease 0.6 percent. HBC does not break out Lord & Taylor numbers alone.

Among the other results,

  • Saks Fifth Avenue had a 6 percent comparable sales increase.
  • Saks Off 5th’s comparable sales fell 3.5 percent.
  • HBC Europe (Galeria Kaufhof and Galeria Inno) saw comparable sales decrease 6.6 percent.

Discussing Lord & Taylor’s future during a conference call Tuesday, HBC’s chief executive officer Helena Foulkes, said, “We will take advantage of having a smaller footprint to rethink the model and focus on our digital opportunities. The Lord & Taylor flagship on walmart.com, which launched last week, is a great example of this and represents how we are thinking about the entire business.”

Unfortunately, many consumers have regarded Lord & Taylor as “your grandma’s store.” Adding to the issue was the retail brand’s increasingly promotional posture, offering a wide range of popular brands and sharp, frequent discounts.

The team has been working to elevate the image including launching in March 2017 the city’s largest dress floor, a 30,000-square-foot space ranging from prom looks and vintage styles to contemporary and designer labels and reviving the store’s tagline, “America’s Dress Address.”

Not long before, the men’s wear, shoes and main floors underwent renovations, and some hipper shops opened, such as the “Just Bobbie” Bobbie Brown lifestyle shop on the main floor.

Last week, the Lord & Taylor “flagship” on walmart.com launched with more than 125 brands, among them Tommy Bahama, Vince Camuto, Miss Selfridge, La La Anthony, Lucky Brand, H Halston and Effy.

That all got vendors excited but the disclosure of closing up to 10 stores including the flagship casts doubts about the future for Lord & Taylor. Attempting to ease concerns, Vanessa LeFebvre, who has been president of Lord & Taylor for just two weeks, e-mailed a letter to vendors Tuesday morning, encouraging them to continue to support the business. “We expect to close up to 10 Lord & Taylor stores through 2019, including our Fifth Avenue location, where we’ve decided not to maintain a presence,” LeFebvre wrote. “These decisions are never easy, especially with a store that has as much legacy as Fifth Avenue and a brand that has as much heritage as Lord & Taylor. We are working to develop our model and refine our merchandise assortment to best meet customer expectations, while creating a seamless shopping experience between online and in-store. We see opportunity to grow Lord & Taylor. I look forward to building our relationship together and transforming into the new Lord & Taylor, differentiating boldly through personalization, efficiency and innovation.”

Lord & Taylor does have a track record for innovation, being the first department store with the vision to move to Fifth Avenue, the first to install an elevator and the first to open a branch store. It was also the first to develop the concept of offering personal shopping services and the first to create Christmas windows for pure delight rather than selling merchandise. The windows continue to be less commercial than the competition’s.

Most significantly, Lord & Taylor was the first major store to have a woman as president – the late Dorothy Shaver. She was considered a visionary for showcasing American designers. Claire McCardle, Bonnie Cashin, Norman Norell, Pauline Trigere, Luis Estevez and Vera Maxwell all made their debut in the Fifth Avenue windows.

During the call, Foulkes was asked by a retail analyst what the endgame for Lord & Taylor chain is, with all the changes being made.

“We are really at the beginning of that journey, in terms what the end game for Lord & Taylor is,” replied Foulkes. “We need to give Vanessa a chance to pull it all together.” At HBC, she added, “Everything is on the table. We are working very hard to make decisions that drive profitability.”