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Does the columnist even know what Home Outfitters is? He compared it to American Eagle Outfitters!!!
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What's in store for Hudson's Bay?
Odds are against a Phoenix-like revival
Jan. 27, 2006. 05:32 AM
DAVID OLIVE
BUSINESS COLUMNIST

"We had to pass where no human being should venture."
— Simon Fraser, early 19th-century Hudson's Bay Co. explorer
For good or ill, yesterday marked a turning point in the fortunes of Canada's oldest company.
Jerry Zucker, the secretive South Carolina investor whose $1.5 billion takeover offer for Hudson's Bay Co. was accepted yesterday by the HBC board after a 17-month standoff, will either make good on his pledge to revive the 335-year-old retailing icon. Or, failing where three previous management teams have done, the career bargain-hunter eventually will make good on his investment by selling off chunks of HBC's commercial heritage.
As he has done consistently since first acquiring a sizeable stake in HBC in 2003, Zucker yesterday promised a retail renaissance at the HBC stable of the Bay, Zellers, Home Outfitters and Designer Depot stores — a compulsory reassurance to suppliers and creditors.
"We are committed to enhancing our customers' shopping experience through a substantially greater focus on service and revitalizing the spirit of the organization," said a statement issued by Zucker.
The Zucker strategy is to pump an annual $325 million over the next three years into modernizing HBC's operations — a decidedly modest sum for Canada's second-largest retailer after Wal-Mart Canada Corp.; upgrade store appearance; emphasize sales of furniture, appliances and other big-ticket items; step up HBC's recent emulation of rival Winners' "off-price" formula; close money-losing stores in the 294-unit Zellers chain; and dispose of HBC's Toronto head office, likely fetching more than $100 million.
Zucker also has plans for jazzing up merchandise display, a chronic weakness at Zellers in particular; introduce state-of-the-art inventory control systems and other behind-the-scenes technology to keep popular items in stock; and boost traffic and sales-per-square-metre by inviting third-party merchants to set up boutiques in the Bay's oversized emporia.
While usually diplomatic over the years in his stated satisfactory regard of CEO George Heller, Zucker would likely install a new management team — a set of fresh eyes at a firm that has a department-store mindset dating from an era when traditional department stores were still relevant — with a more innovative group perhaps headed by Winners founder David Margolis or Sears Canada Inc. turnaround CEO Paul Walters, who was ousted in a power struggle with the incoming CEO of Sears, Roebuck & Co.
Heller and his board forced Zucker's hand. Like Kirk Kerkorian and his so-far unhappy investment in General Motors Corp., Zucker finds himself with a wasting asset. In 2003, he seemed content to wait on the bountiful profits to flow from Heller's recently unveiled five-year plan to arrest market-share losses to nimble competitors.
By October of last year, Zucker had changed his tune, launching a takeover bid for the entire firm, but Heller had not changed his. Announcing calamitous financial results in November, Heller continued to insist that staying the course was preferable to a takeover. "The best way to maximize shareholder value is to execute the strategic plan."
Zucker would agree. But HBC has not followed through on that plan. Blaming everything from soaring gasoline prices that crimped mall traffic to a bulky new inventory system that has depressed big-ticket sales, HBC reported a sextupling of losses in its latest quarter in November, to $50.3 million. More important, same-store sales — revenue at stores open a year or more — continued to slide at the Bay (down 6 per cent) and Zellers (down 2 per cent).
"Two years into their five-year plan and they have failed completely to improve profitability, sales levels or margins," Zucker's Canadian-born spokesman Robert Johnston complained in November.
The odds are against a Phoenix-like revival of HBC, long a commercial anachronism in a field now dominated by highly focused merchants. Which is not to say nothing good will come of a Zucker-led regime.
On their own, freed of the weight of HBC's debt, overhead and sclerotic decision-making, the Bay, Zellers and Home Outfitters could yet thrive as northern versions of Nordstrom Inc., Target Corp. and American Eagle Outfitters Inc., respectively.
As experience shows, all-purpose general merchandising — with the singular exception of Wal-Mart — is an obsolete concept. And that HBC in its current form is a business that no entrepreneur would venture to create in this day and age.