This weekend, the New York Times ran an interesting piece about Richard Baker, the wealthy real estate investor-turned retail executive who bought Lord & Taylor and Hudson’s Bay in 2006:
If Mr. Baker sounds like a rich kid playing with his new toys, well, that’s because he is a rich kid playing with his new toys. Only the toys happen to be two of the oldest department store chains in North America: Lord & Taylor, the grande dame that used to anchor the Ladies’ Mile in Manhattan, and the Hudson’s Bay Company of Canada, which traces its roots back to the 17th-century fur trade.
How Mr. Baker, 45, came to own these baubles is a story for our financial times. He’s not exactly a self-made man. His father, Robert C. Baker, owns a giant shopping mall development company. But in 2006, just before the recession, the younger Mr. Baker took a flier and bought Lord & Taylor, and later the Hudson’s Bay Company, putting down almost no money and borrowing more than $1 billion to finance the deals. Just about everyone in retailing wrote him off. Many whispered that he would get hammered, like several investment hotshots who set their sights on this business.
But a funny thing happened on the way to the comeuppance. It turns out that Mr. Baker wasn’t so bad at running department stores. In 2010, sales at Lord & Taylor’s 46 stores rose 12.2 percent from the previous year, and are now higher than they were before the recession bit. And Hudson Bay’s flagship Bay stores posted their first increase in same-store sales in a decade. Earnings at the combined companies totaled $450 million last year, before taxes, up from $330 million in 2009.
In January, Mr. Baker solved the company’s debt problem, striking a complex deal to sell the rights to leases on an underperforming division of the Hudson’s Bay Company to Target for about $1.8 billion. There are discussions about an initial public offering of the combined companies as soon as this fall.
“Richard shocked everybody,” says Matthew E. Rubel, the chief executive of Collective Brands, which runs businesses like Payless ShoeSource.
If the story sounds a little familiar, that’s because it’s not that different from that of how Sears Holdings Co. came to be. A successful investor with little retailing experience (Eddie Lampert) merged two storied retailers (Sears, Roebuck & Co. & Kmart) with the hopes of leveraging its vast real estate portfolio. However, that’s where the similarities end. Continue reading ‘Quick View: Two Contrasting Retail Turnaround Stories’
