REUTERS: Hudson's Bay Co said on Wednesday it would sell its Lord + Taylor department store business to fashion rental service company Le Tote Inc for about US$100 million, as the retail operator culls its portfolio to a few key brands.
The retail company has been selling businesses and closing stores over the past few years to focus on luxury department store chain Saks Fifth Avenue and Hudson's Bay in Canada to shore up its finances as shoppers skip brick-and-mortar stores to shop online instead.
Le Tote will pay Hudson's Bay CUS$99.5 million (US$74.95 million) in cash when the deal closes and another CUS$33.2 million in cash after two years. Hudson's Bay will receive a 25 percent equity stake in Le Tote and two seats on the company's board.
"It allows us to focus on Saks and its upside potential," said Hudson's Bay Chief Executive Helena Foulkes, adding that the company is simplifying and streamlining Hudson's Bay in Canada.
The deal with Le Tote comes months after Hudson's Bay Executive Chairman Richard Baker offered to take the Canadian retailer private in a CUS$1.74 billion deal.
A special committee of Hudson's Bay's board said Baker's offer for the company was "inadequate," while shareholders, who must approve the deal, have opposed it because it does not provide enough value.
Hudson's Bay's sale of the Lord + Taylor business is the latest of several divestitures. The retailer announced in 2017 it would sell Lord + Taylor's Manhattan flagship to co-working space manager The We Company.
Earlier this year, Hudson's Bay sold its remaining stake in its German real estate venture for CUS$1.5 billion.
Lord + Taylor has seen its fortunes fall while Saks Fifth Avenue has managed to increase sales.
Under the deal, Le Tote will acquire the Lord + Taylor brand and related intellectual property, while assuming operations of 38 stores, Lord + Taylor's digital channels and the associated inventory.
Le Tote will set up drop-off points for its apparel rental business in the stores, in its first move into bricks and mortar, said Chief Executive Rakesh Tondon.
Le Tote will use its technology to improve product recommendations and personalized shopping experiences at Lord + Taylor, he said.
"We want to keep the Lord & Taylor brand (and) energize it, (but) not change too much too quickly," Tondon said.
Apparel rental is a small but fast-growing part of the struggling clothing sector, with retailers like Bloomingdale's and Banana Republic launching subscription services this month alone.
Le Tote competitor Rent the Runway entered a deal with Nordstrom in June to install 'drop-off boxes' in Nordstrom stores for customers to return rented clothing.
(Reporting by Jessica DiNapoli and Debroop Roy in Bengaluru; Editing by Anil D'Silva and Steve Orlofsky)