At Rankin Inlet, N.W.T., an outpost of 1,400 people on the treeless northwestern shore of Hudson Bay, life revolves around the Hudson’s Bay Co. store. It is the same all across the North where, for more than 300 years, the frontier posts and stores have been a source of anything from food and ammunition to, more recently, dishwashers and television sets. The stores have also been a place to cash cheques, to sell furs and soapstone carvings when money was tight, or simply to catch up on local gossip. But the Hudson’s Bay Co. (HBC) has decided to loosen its venerable 316-year attachment to Northern Canada. On March 31 it will sell its 178 northern outlets in a move to
reduce its $2.5-billion debt. The buyer, a newly formed company called Hudson’s Bay Northern Stores Inc., comprises Mutual Trust Co. of Toronto, the stores’ existing management, HBC itself and several financial institutions. A final share division has yet to be established.
In two years, when the new organization relinquishes the Hudson’s Bay name, a northern landmark will disappear. Said Justin Merritt, manager of the Rankin Inlet store: “I do not like the name change. But the sale means more money for expansion and modernization.” And for HBC the $180-million deal was a clear signal to investors that the Toronto-based retailing empire intends to continue chipping away at its crippling debt
under an austerity drive launched in 1985. The northern chain, although profitable, accounted for just $400 million of the company’s estimated $5.6 billion in sales in 1986.
Overall, HBC has recorded losses for the past five years in the face of stiff competition from other department store chains and the growing popularity of small specialty retailers. And over the past two years executives have stated that HBC will continue to sell off its assets with the exception of its core department stores —Simpsons, Zellers, and The Bay—and its lucrative real-estate arm, the Toronto-based Markborough Properties Ltd., which has net assets of $750 million.
Rolph Huband, HBC vice-president and secretary, said that, in the face of continued losses even during the austerity program, the northern stores had to go despite their symbolic importance. Said Huband: “The heritage and adventuring spirit of the company is gone.” Added Kenneth Thomson, owner of Thomson newspapers and the 75-per-cent majority shareholder of HBC: “It has been a real thrill to be part of that early history. But [the sale of the northern stores] made sense for the interests of the company.”
The frontier stores were the last remnants of the sprawling fur-trading empire built by the Company of Adventurers of England Trading into the Hudson’s Bay. Founded under charter by King Charles II in 1670,
the company’s founders had already established its first trading post in 1668 at Fort Rupert on James Bay. From there, the original band of 18 adventurers, including explorer Pierre Radisson, expanded the company’s territory to the west. At its height in the mid1800s, the company controlled one-quarter of North America. But the company did not become predominantly a northern retailer until 1870, when it sold much of its territory to the new Canadian government.
But the firm’s current management £ can only envy the “ wealth that the HBC I generated in the ? mid-19th century. The company has lost about $350 million since 1981. HBC’S problems date from the onset of recession in 1981, and in 1982 it lost $122 million. Although the national economy has generally improved since then, analysts say that departmentstore chains have continued to lose ground as consumers migrated to more intimate, singlecommodity outlets such as Dylex Ltd.’s Fairweather clothing chain and smaller specialty lines such as Roots Natural Footwear.
Analysts say that HBC has also suffered from regional economic problems and from its expensive and. largely futile attempts to revive its embattled Simpsons subsidiary, a 16-store, Ontariobased chain which HBC bought in 1979. John Winter, an analyst with Clayton Research Associates Ltd. of Toronto, said that the company’s 69 Bay stores are concentrated too heavily in the West, where the recession has been unrelenting. Said Winter: “The Bay has 43 per cent of its retail space in British Columbia and Alberta at a time when Ontario and Quebec are the strong markets.” But
even in booming Ontario and Quebec, Simpsons made just $7 million in 1985. HBC transferred its president, Allan Brent, last fall after a $10-million attempt to lure upscale consumers failed and alienated middle-income shoppers in the process.
HBC’s current austerity drive follows other cost-cutting moves by executive vice-presidents George Kosich and Iain Ronald. Since 1985 the company has sold off $400 million in assets, including Winnipeg-based hardware distributor Marshall Wells Ltd., two corporate jets and HBC’s shares in Hudson’s Bay Distillers Ltd., Eaton Bay Financial Services Ltd. and HBC Travel Ltd. And in 1984 and 1985 the company transferred 32 Bay and Northern Stores Division outlets into the 215-store Montrealbased national Zellers chain —a more prosperous HBC subsidiary carrying less expensive merchandise. Last month the company sold its fur-auction houses in London and Toronto for an undisclosed sum. It has sold furs in London since 1672 and in Canada since 1949. And Ronald says that the company is willing to sell Hudson’s Bay’s 54.3 per-cent holding in Roxy Petroleum Ltd. of Calgary. As a result, he told Maclean's, the company hopes to trim its debt to $1.5 billion by the end of the decade.
Ian Sutherland, executive vicepresident of Mutual Trust Co., and
Raymond Doré, Mutual’s president, first approached Ronald last September with an offer to buy the northern stores. Sutherland knew the northern operation well. His father had been a senior vice-president of the Northern Stores Division and Sutherland’s own first summer job was in the Minaki, Ont., Hudson’s Bay store. But HBC management, sensitive to the northern chain’s symbolic importance, at first turned down the offer. Said Sutherland: “It was difficult for them to decide if it was for sale.”
But ultimately HBC management, under mounting pressure to pare the $2.5-billion debt, agreed to the deal last month. Still, Sutherland said that Mutual Trust’s main interest in the deal was the cash that it could earn as the merchant bank putting the transaction together. “We are not in the retail business,” he said. “We have put together a group of institutional investors including two major pension funds and life insurance companies.” Marvin Tiller, chief operating officer of HBC’s Northern Stores Division, will become president of the new Hudson’s Bay Northern Stores Inc.
Managers of some of the northern stores welcomed the change as a chance to leave debt-ridden HBC behind and expand and modernize their stores by adding features like computerized inventory. Said Merritt, at the Rankin Inlet store: “All the money we made and could use to upgrade was taken away.” Added Tiller: “If we had one frustration it was being a small organization in a big company that was busy competing with Eaton’s and Sears.”
Such competition had forced HBC to close, or transfer to Zellers, 40 northern stores during the past three years, most of them located in recession-hit resource-based towns. And Tiller said that delays in expanding The Bay stores in Yellowknife and Fort Franklin had made shopping there a crowded, uncomfortable experience. Still, as HBC continues to shed its assets, the venerable and once mighty Company of Adventurers is rapidly becoming indistinguishz able from its southern re| tailing competitors.
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