Canadian retail group Hudson's Bay Company announced the sale of the iconic chain of luxury department stores Lord & Taylor.
The buyer is Le Tote, which owns the service of renting clothes by subscription. The transaction, which will include 38 operating department stores in the U.S., digital channels and rights to the Lord & Taylor brand, will amount to $100 million, including $75 million in cash and $25 million secured by a promissory note payable in two years. As part of the deal, HBC will also receive a small stake in Le Tote and two seats on the company's board of directors.
"We are delighted to have reached an agreement with Le Tote that creates a new model for Lord & Taylor that combines subscription fashion rental with traditional retailing opportunities," said Helena Fulkes, CEO of Hudson's Bay.
In turn, thanks to the sale of Lord & Taylor's recently under pressure business, Hudson's Bay will focus on the development of the namesake department store chain in Canada (now numbering about 90 stores) and the luxury Saks Fifth Avenue. The HBC began the restructuring of the business with the sale of the online store Gilt and the German department store chain Galeria Kaufhof, which was bought in June by the Austrian Signa Holding. As for Lord & Taylor, in fiscal 2018, the chain's revenue amounted to $1.4 billion, which is equivalent to 14% of all sales in the portfolio of HBC.
Le Tote, top fashion brands clothing rental service, was founded in 2012. The company offers its customers a subscription fee of 79 dollars a month. According to GlobalData, the fashion rental market was estimated at $1 billion in 2018. It is expected to grow by more than 20% annually and reach $2.5 billion by 2023.
After the purchase of Lord & Taylor, the company expects to literally "reopen" the legendary brand. Le Tote will open department stores in a smaller format, as well as review the concept of existing stores and work on new locations. Also, the new owners will expand and personalize existing offers in Lord & Taylor, which traditionally specializes in dresses. One of the new directions in the business of department stores will be the service of clothes rental by subscription. At the same time, the company is considering the possibility of strengthening its online sales channels, including the launch of sales through the Walmart website. But the final decision on this issue has not yet been made.