The Hudson’s Bay Co. announced a sweeping “transformation” plan on Thursday, involving 2,000 layoffs, new leadership at the department store divisions and 350 million Canadian dollars in annual savings.
Liz Rodbell, formerly president of the Hudson’s Bay department store division in Canada and the Lord & Taylor chain in the U.S., will now be solely in charge of L&T.
Alison Coville has been named president of Hudson’s Bay and Home Outfitters in Canada. She was most recently senior vice president and general merchandise manager for the department store group that includes Hudson’s Bay and L&T and has held leadership positions in merchandising at HBC since 2005.
HBC is now decentralizing its department store group to have separate senior-level merchants and store operations executives. Previously, one senior team oversaw both divisions, while there were always separate buyers for each division.
“This transformation plan is a very thoughtful strategic approach. We’ve been working on this for six months,” HBC’s chief executive officer Jerry Storch told WWD.
Most of the 2,000 layoffs occurred Thursday, though there were some cuts made in February, Storch said. “Today was the major day of activity — jobs across the company were affected, both in headquarters and stores, with a large percentage in the U.S.”
Storch said layers of management were removed “to streamline the decision-making process. In these rapidly changing times, you need to react fast to the market.”
The 2,000 workers represent 4 percent of HBC’s North American workforce. HBC’s operations in Europe, which include the Galeria Kaufhof department stores in Germany, were not impacted in the transformation plan.
HBC said annual savings from the plan are expected to total more than 350 million Canadian dollars, or $259 million, by the end of fiscal-year 2018, with about 170 million Canadian dollars, or $125.8 million, anticipated to be realized this fiscal year. Of that, the actions necessary to secure 125 million Canadian dollars, or $92.5 million, were complete as of Thursday.
By creating separate leadership teams for Hudson’s Bay and Lord & Taylor, “This will enable market specific strategies,” Storch said. “The environments and business conditions are different in the two countries.” He characterized Hudson’s Bay as “one of our best performing banners,” adding that “Lord and Taylor faces a much more competitive environment. Liz can focus much more heavily on the U.S. market and driving the digital business.”
The plan also entails integrating digital functions through the organization to develop and maximize all-channel solutions for marketing, operations and technology, and realigning resources involving IT and digital, store operations and visual merchandising, buying and planning and marketing, to increase efficiencies and leverage scale.
In other personnel changes, Janis Leigh has been promoted to chief human resources officer from senior vice president of human resources; Janet Schalk, chief technology officer, will lead the newly created HBC Technology group; Ian Putnam, chief corporate development officer, has added responsibilities as chief operating officer for HBC’s ventures and will lead the real estate team; Kerry Mader, executive vice president of store planning and operations, has taken on additional responsibility for store operations across North America and for visual merchandising; Andrew Blecher has been named chief communications officer, and Erik Caldwell has assumed additional responsibility for digital operations and procurement, and has been named senior vice president, supply chain and digital operations.
HBC continues to search for a chief financial officer.
The company also disclosed Thursday results for the first quarter, including an increase in the net loss to 221 million Canadian dollars, or $163.5 million, versus 97 million Canadian dollars, or $71.8 million, in the year-ago period. Adjusted earnings before interest, taxes, depreciation and amortization were 168 million Canadian dollars, or $124 million, compared to 250 million Canadian dollars, or $185 million, in the prior year.
Total retail sales in the quarter decreased 3 percent to 3.2 billion Canadian dollars, or $2.37 billion, and comparable sales fell 2.9 percent.
“This was a tough quarter for HBC,” said Richard Baker, HBC’s governor and executive chairman. “While the retail apparel market remains particularly challenging, we are taking steps to adapt, beginning with our transformation plan announced today. This initiative will reshape our organization to accelerate delivery of a best-in-class all-channel experience to our customers while improving our cost structure.”
Comparable sales were flat at HBC Europe and declined 2.4 percent at the North American department store group, 4.8 percent at Saks Fifth Avenue and 6.8 percent at HBC Off Price, which includes Saks Off 5th and Gilt. The first Saks Off 5th unit in Germany opened in Düsseldorf on Thursday to “large crowds,” the company said. HBC believes it could open up to 40 Saks Off 5th units in Germany.
Comparable digital sales increased 5.4 percent, and 13.2 percent at the department store banners.
Although overall comparable sales at the department stores declined, sales increased at Hudson’s Bay, primarily driven by strong overall digital sales. Active and ladies shoes continued to perform well, while handbag sales declined and growth in home was lower year-over-year, the company said. Ongoing initiatives at Hudson’s Bay include an increased focus on active, dresses, home and men’s, as well as “focused” digital marketing designed to drive all-channel sales.
At Lord & Taylor, in-store traffic remains challenging, executives said, though there has been improvement in overall conversion. Lord & Taylor continues to heighten its focus on active, dresses, denim and fine jewelry, and digital.
Baker said the transformation plan would make the company “more agile and better able to respond to evolving customer preferences and a rapidly changing retail landscape. We strongly believe that our model of combining world-class real estate assets, which are less impacted by short-term trends, with our diverse retail businesses, provides long-term value for the company and our shareholders.”
“We know we can do better and we are taking bold, decisive action,” Storch added. “Rather than chase the rapid industry changes, our transformation plan will reposition HBC to get ahead and stay ahead.”
Storch said the transformation plan includes “significant improvements to our organizational structure, store operations and procurement strategy.”
In other changes, HBC is realigning in-store sales coverage across its North American banners to better serve customers, including implementing additional training for store associates. Store operations across HBC’s North American banners will be centralized to share best practices. And the buying and planning teams have been restructured to reduce layers and create a more flexible and nimble merchant organization. Marketing support functions have been centralized.