Wednesday, April 8, 2009

 

POLISHING THE TARNISH

It is a gargantuan effort, not unlike re-floating the Titanic.

The explorer Simon Fraser, he who blazed Canada's expansion all the way to the Pacific Ocean, is buried in the historic Roman Catholic parish cemetery of St. Andrews on the outskirts of Cornwall, Ontario where he died a poor man in 1862.

Fraser was the last surviving partner of the famed fur trading Northwest Company which merged with its rival, the Hudson's Bay Company, in 1821. Hudson's Bay, every Canadian knows, is the oldest continually operating commercial establishment on the North American continent. It was formed on May 2, 1670.

The venerable Hudson's Bay Company and its 92 flagship "The Bay" stores have been the subject of multiple failed makeovers since the 1990's. Struggling through increasingly poor performance, ownership passed into American hands in 2006 when a minority shareholder, South Carolina billionaire, Jerry Zucker, bought the company. After Mr. Zucker's untimely death a U.S. based shopping centre holding company, NRDC Equity Partners, took over.

NRDC is the first owner in many years to have some sense of merchandising and the consumer retail business. Among others, it owns the high end U.S. retailer, Lord and Taylor, a company it acquired from Federated Department Stores. If I may digress ever so briefly: Ownership of "Federated" back in the halcyon days of the mid-1980's brought the over-leveraged financial empire of Sudbury born millionaire, Robert Campeau, to a crashing collapse.

Alas, since the beginning of the current economic downturn, some of the other retail assets of NRDC Equity Partners have been on the rocky road to oblivion. "Linens'n Things" flamed out in the fall. In February, "Fortunoff" filed for bankruptcy. In efforts to stop the bleeding, NRDC has pumped about $130-million in cash into "Lord & Taylor"and "The Bay."

A Toronto based retail analyst, John Williams, recently told MacLean's that mid-market department stores are on a death watch. Many of my generation will recall fondly the iconic retail giants of the mid-twentieth century: Creaghan's, Simpsons', T.E. Eaton...and some more now forgotten names. Williams says: "It's not a viable format...they're squeezed between value merchants - the Wal-Marts and Winners - one one end, and luxury stores and specialty boutiques on the other."

In 2005 in a $100-million deal, The Bay, acquired the Canadian Olympic Team clothing line from Roots Canada. "Roots" Olympic products, their marketing and most importantly the commitment to an all-Canadian made product line had ensured its success and recognition. And made it,
as well as the Canadian Olympians, the envy of the far larger producers from competing countries.

In the Olympic Games since, The Bay's clothing line, manufactured in China, has been plunged into controversy and criticism. In store sales haven't matched expectations. The tarnished image, just like the venerable Hudson's Bay Company, needs a bit of patriotic "dab and polish". Perhaps otherwise, next winter's Vancouver Olympics clothing line may be the iconic retailers' last effort to remain afloat amongst the icebergs of competition and dwindling sales. That surely would be a catastrophe!

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