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Okay, so Jerry Zucker, the industrialist from South Carolina, has finally picked up the keys to Hudson's Bay Co., the iconic but chronically troubled department store retailer that operates the Bay and Zellers chains. With a majority of shareholders agreeing in late February to sell their shares to Zucker for $15.25 each, he now has 82% of the company's stock, giving him control.
Because he doesn't have 90%, which would mean all remaining shareholders must tender to the offer, he's extended his deal to March 9. And if he still doesn't have 90%, a shareholders meeting would be held in early April to put into place the mechanism by which he can acquire the rest of the shares, with the takeover going to a vote.
Zucker would then have the necessary votes to get all the shares; perhaps a few weeks later than he would have liked, but a convincing victory nonetheless. Given the long, drawn-out battle for HBC — it began when Zucker started buying shares in late 2003 — Zucker probably doesn't mind waiting a bit longer to win his prize.
The big question now, of course, is what's next for the 336-year-old retailer, Canada's oldest corporation. The other thing that pops to mind is the old Confucian curse, "Be careful what you wish for; you just might get it." Certainly, turning around a Titanic-sized retail mess like HBC will be no easy task. Just ask current management — including CEO George Heller and executive vice-presidents Thomas Haig and Marc Chouinard — who spent the last six years trying to do the job. But you better ask quickly, because the betting in the analyst community is that they may not be around for much longer.
Other than a few clues — like plans to install high-tech inventory control equipment, close some money-losing stores, sell the Simpson Tower office building in downtown Toronto and attempt to boost traffic by allowing third parties to set up stores within a store — the highly secretive Zucker (he rarely gives interviews) isn't giving too much detail about his intentions for reviving the company.
But he's adamant he plans to keep the retailer a going concern. Zucker says in a release announcing the results of the offer that he's "pleased to be associated with a company with such a long and proud history" and wants to "build upon HBC's strong position and dynamic growth opportunities."
Essentially, there's nothing wrong with HBC, says Zucker's spokesman Robert Johnston. "It just needs to be run better." (These kinds of comments are why there's speculation that Heller and his team will soon be ousted. But don't be too worried for them: HBC has already said the top six officers will get a combined $10 million in severance should they be sent packing.)
In trying to read the retail entrails, industry watchers will look at the background of any replacement. If it's someone with a strong background in retail — David Margolis, founder of the hugely successful off-price Winners chain, is one name that keeps coming up — then analysts suggest this might mean Zucker is sincere about turning the operations of the Bay and Zellers around. If that retail experience isn't there, you can probably infer Zucker has something else in mind, like making a real-estate play that would see the company broken up.
Johnston says Zucker is "incredibly excited" to get started on taking his best shot at reviving HBC. In that case, here are just a few things for him to focus on:
- Close unproductive stores. There's no way around it — money-losing
Zellers and Bay stores will have to go, and we're not just talking about a
tweak here and there. How many, and how to go about it, comes down to the
costs of getting out of lease agreements. But survival is the name of the
game, and purging the weak is essential.
- Stay in stock. Nothing is more irritating to a consumer than going into
a store and not being able to get what she wants because the store is sold
out. Keep basics in stock. If customers feel sure they can find what they're
looking for, they'll come back.
- Keep merchandise fresh. Improving inventory turns so that the merchandise
is fresh to the consumer is vital to modern retail. Zellers and the Bay should
take their cue from hot European retailers like H&M and Zara, which liven
up their offerings with frequent inventory turns. It's depressing for consumers
to walk into a Bay store and see the same things they saw months earlier,
the only difference being the goods have been relegated to a jumble of clearance
racks in store aisles.
- Fix up Zellers. Yes, Zellers has improved a lot over the last few years,
but it's not there yet. The task is still huge, made harder because retail
gorilla Wal-Mart has the upper hand. More has to be done to expand the improved
Zellers format of more space and wider aisles. And if you want Zellers to
be a Target, the "cheap chic" U.S. department store chain, do a
better job emulating the formula. Fixing Zellers may well be the biggest challenge
for HBC's new owner, and it's tough to guess if the damaged brand can ever
be fully repaired.
- Beef up marketing. Let the public know what's in the stores. Give the Bay and Zellers, which many consumers consider irrelevant amidst the incredible choice available today, identities that make them stand out. Give shoppers a reason to come to the stores.
This is just a sample of the tasks awaiting Zucker. Most of these suggestions
aren't new, and many have already been tried. The trick now is for someone —
and maybe it will be Zucker — to get it right.
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