Lord & Taylor is up for sale, but it’s a tough proposition considering how the business is positioned — it’s a 194-year-old regional department store lacking profitability and catering to more mature shoppers.
Still, there’s some brand equity in the venerable Lord & Taylor name, and a handful of productive Lord & Taylor stores in non-mall locations that could be of interest to other retailers. Landlords looking to repurpose square footage in mall locations could also pick up some stores, if Lord & Taylor ends up getting sold in pieces.
Lord & Taylor operates 45 stores, mainly in the Northeast, and generated $1.04 billion in volume last year, or 1.4 billion in Canadian dollars. At its peak, Lord & Taylor generated around $1.5 billion in sales and $120 million in profits, but is said have lost millions annually in recent years.
Kohl’s, Dillard’s, TJX Cos., Primark and Nordstrom, and landlords such as Simon Properties, General Growth Properties and Macerich would likely examine certain Lord & Taylor sites. Among the retailer’s best are those in Manhasset and Scarsdale, N.Y.; Stamford, Conn.; Westfield, N.J.; South Shore Plaza in suburban Boston, and Chevy Chase, Md. Neiman Marcus and Nordstrom have taken over Lord & Taylor sites in the past.
The Hudson’s Bay Co. said Monday it is pursuing “strategic alternatives” for the Lord & Taylor division, a decision that reflects continuing efforts to streamline the group’s retail portfolio.
“This review of strategic alternatives for Lord & Taylor is another example of how we are exploring options to position HBC for long-term success,” said HBC chief executive officer Helena Foulkes on Monday. “Over the last year we have taken bold actions and made fundamental fixes that have resulted in a far stronger, more capable HBC, having returned to positive operating cash flow, increased profitability and having strengthened the balance sheet.”
HBC earlier this year said it would shutter its Home Outfitters chain in Canada, close up to 20 Saks Off 5th stores in the U.S. and perform “a fleet review” of the 133-unit Saks Off 5th chain, which lately has been a weak performer in the otherwise robust off-price sector.
HBC also last year sold off Gilt Groupe to Rue La La, and has been streamlining in Europe as well. In 2018, the company sold off a majority interest in its European retail operations to Signa Holdings, which owns the Karstadt department store chain in Germany, and a 50 percent stake in its European real estate. The sale to Signa led to a merger of the Kaufhof and Karstadt department store chains in Germany.
In other HBC downsizings, in January the Saks Fifth Avenue women’s store in Brookfield Place in lower Manhattan was closed, after operating for just two years, though Saks overall has been outperforming the competition. Some sources speculate that a few top L&T locations could be converted to Saks.
HBC said that a sale, joint venture or a merger of Lord & Taylor with another company are possibilities, but that no decision has been made. Executives at HBC said the “strategic alternatives” involve the retail operating business of Lord & Taylor. The Toronto-based HBC has hired the PJ Solomon financial advisory firm to assist in the Lord & Taylor review and help find a buyer. If one isn’t found, it’s conceivable that the division could be shut down.
Some Lord & Taylor real estate could be retained and 30 locations, including top Lord & Taylor doors such as Scarsdale and Manhasset, are part of a venture with Simon Properties formed in 2015. HBC contributed a total of 42 owned or ground-leased properties to the venture and the Saks flagship in Beverly Hills was also put into the joint venture.
Retail sources painted a picture of Lord & Taylor performing poorly for about a decade, hampered by an overreliance on classic, aging Baby Boomer customers; larger competitors with stronger buying clout such as Macy’s; a Manhattan flagship that was overspaced and lacked productivity, and a corporate parent that put its main focus and resources on more promising divisions such as Saks and Hudson’s Bay in Canada.
Nevertheless, HBC has been able to capitalize on its retail real estate, having sold the 11-level, 650,000-square-foot Lord & Taylor flagship on Fifth Avenue between 38th and 39th Streets for $850 million to WeWork, now called The We Company. The Lord & Taylor business in 2006 was purchased by HBC’s predecessor company, NRDC Equity Partners, from Federated Department Stores (now Macy’s Inc.) for $1.083 billion. HBC bought Lord & Taylor primarily because of its real estate, but later saw potential in the retail operations as well.
HBC’s real estate deals have helped pay some corporate debt stemming from acquisitions and shore up the balance sheet. Yet as a consequence of those deals, Lord & Taylor has been saddled with new rents, digging into its profitability.
Sources characterized Lord & Taylor as late in the game to embrace e-commerce. Seeking to catch up, in spring 2008 a Lord & Taylor “flagship” on walmart.com went live with a low-key launch. A Lord & Taylor buyer could continue the partnership.
Lord & Taylor was also late in the game with store renovations, though there have been some significant ones. The Manhasset store last year added 39,000 square feet, bringing it up to 122,000 square feet. The main entry was reenvisioned with a 45-foot-high glass cube atrium; there are enhanced fitting rooms; space for personal shopping meetings, and a contemporary ambience, with washed wood, metals and glass defining departments more clearly. The location could interest other retailers, though turning it over might be complicated because of the joint venture.
In Garden City, N.Y., which like Manhasset is an affluent community, the Lord & Taylor store was also renovated a few years ago, and in 2010 the Fifth Avenue flagship was touched up.
“The hope is there would be some kind of merger with another retailer. That would be the most positive outcome,” said a source familiar with Lord & Taylor. “There is some brand equity in the name. But business has been difficult. The reality really set in with the closing of the Fifth Avenue flagship.”
On Jan. 25, HBC’s executive chairman and governor Richard Baker staged a Lord & Taylor “brand summit” at HBC offices in Brookfield Place in lower Manhattan where Lord & Taylor, Saks Fifth Avenue and Saks Off 5th have their headquarters. “Richard did speak and asked people to hang in. The vision was all about what Lord & Taylor was going to do differently, with re-branding,” said the source, adding that the goal has been to make it profitable without growing the business. “Postrecession, there was some positive movement, but business has been pretty flat since, and most recently, very difficult.”
Lord & Taylor is the nation’s oldest department store, founded in 1824 by Samuel Lord on Catherine Street in lower Manhattan. His cousin, George Washington Taylor, joined in 1834, and the store was renamed Lord & Taylor.
The retailer has a history of firsts. In 1945, Dorothy Shaver became Lord & Taylor’s president and the first woman to head a major retail establishment in the U.S. In 1945, she opened America’s first branch store, the Manhasset site, and subsequently introduced the American Beauty Rose as the store’s symbol.
Under the leadership of Joseph E. Brooks in the Seventies, Lord & Taylor sustained its aura of elegance, and as a bastion of American fashion design, even as it aggressively expanded into Texas, Illinois, Michigan and Florida. Brooks had the flagship play “The Star Spangled Banner” each day upon opening to shoppers.
In retrospect, however, expansions beyond the brand’s Northeastern roots proved unsuccessful in the long run.
In 1986, the May Co., which later merged into Macy’s, acquired Lord & Taylor and imposed its merchandise matrix on the business, reducing its level of differentiation and adding to the merchandise sameness that did then and still does permeate much of retailing.
In 2003, Lord & Taylor bit the bullet by closing 32 stores and downsizing back into a Northeastern regional retailer. While necessary to lift profitability, the downsizing impacted the brand image. Further image erosion came with the closing of the Fifth Avenue flagship last January. Other recent closings were in Skokie and Oakbrook, Ill., Annapolis, Md., and Eatontown, N.J., and more could come.