Hudson’s Bay recently announced plans to acquire Neiman Marcus Group LLC, aiming to create a luxury goods powerhouse. However, some Canadian shoppers at the Bay chain are concerned about the basics, as several stores across Canada were temporarily closed for repairs for their heating, ventilation, and air-conditioning systems. For example, stores were closed in Vancouver, West Vancouver, Nanaimo, B.C., Coquitlam, B.C., and Victoria on Tuesday, according to the Vancouver Sun. Stores were also reported to have closed in Winnipeg and Windsor, Ont.

The closures have been criticized by some retail analysts as signs of stress due to financial headwinds facing the sector. “It is definitely not normal,” Liza Amlani, principal and founder of the Retail Strategy Group, said. “They thought (temporarily) closing the stores would be more cost-effective than bringing someone in to fix the problems and making some sales. That tells me that certain stores at the Bay are struggling.”

HBC announced that the completion of its US$2.65-billion deal to buy Neiman will create a separate entity for its Canadian business, which includes the Bay stores and a real estate portfolio estimated to be worth $2 billion. The Canadian business will be “recapitalized as a standalone entity with significantly reduced leverage and enhanced liquidity.” HBC did not provide any comment or elaborate on how creating a separate Canadian entity will help improve the situation of some of its stores in Canada.

Retail analyst Bruce Winder said that creating a separate Canadian entity could mean that the Bay will need to be self-sufficient because it is now “sort of on its own.” David Ian Gray, principal and retail strategist at DIG360 Consulting Ltd., believes that the Bay may not be the primary focus for HBC senior leadership, who will be more focused on Saks Global, the new company formed after the merger of HBC’s Saks and Neiman.

Keeping the Canadian operations separate could potentially increase a dedicated focus on them and free up some funding, but it does not guarantee additional funding and resources will be used for core issues. The Bay needs to dial back the perpetual cycle of discounting, update neglected stores, and repair relationships with customers and vendors before any hope of real revitalization. In November, HBC completed a series of real estate transactions to raise US$340 million in cash that the company said it would use to help fund the acquisition.

Source: Financial Post