Lots of people have said it lots of times but now Richard Baker, the CEO of Saks Fifth Avenue parent company Hudson’s Bay Co., is saying it himself: he’s in it for the real estate.
In an interview with WWD, in explaining the parent company’s latest monetization of its real estate holdings, Baker was quoted as saying, “Our largest business is our real estate business. Everyone seems to have forgotten that I was a real estate guy, still am, and that HBC is primarily a real estate company. We own $7 billion worth of real estate.”
Baker over the years has accumulated a portfolio of companies in the retail industry that has zigged and zigged with various degrees of success. At one time he owned both Lord & Taylor and New York specialty chain Fortunoff, both of which eventually went belly-up. He bought Hudson’s Bay in 2008 and followed that up with Saks five years later. Soon after he bought European department store chain Kaufhof only to sell it off a few years later. There have been several other retail banners that Baker has shut down, including Home Outfitters in Canada, while the Saks off-price unit has been downsized and was once rumored to be on its way out completely.
What exactly is going on now at HBC is behind closed doors as the company went private three years ago, seemingly to shield itself from investors and shareholders who weren’t thrilled with its performance. And while this new financing deal is supposedly to fund retail development, who knows. As a private company these funds could be used instead for paying down debt, issuing special dividends or providing for bonuses to executives. There’s just no way to know.
All along Baker has been fiercely criticized as the latest in a long line of real estate types who bought into retail and professed they could run the business better than the executives in the business itself. That group includes Eddie Lampert at Sears/Kmart and going back further to Robert Campeau who bought Federated, both of whom proved to be dismal failures in the retail game.
Baker always said he was different and he knew what he was doing when it came to retailing. While HBC was public that always wasn’t the case and, again, today it’s anybody’s guess what the company’s performance is and how what had been a huge load of debt is weighing it down. This new fund-raising effort is only the latest example of using its real estate to fund the ongoing business.
And now Baker finally admits it’s all about the real estate. It’s an admission that confirms what we all always knew: real estate comes first and retailing is at best secondary at Hudson’s Bay Company.
WarrensReport 