Hudson’s Bay Company, the Canadian retailer that owns department store chain Lord +Taylor, is selling the struggling brand for $100 million to Le Tote, an online subscription clothing rental service based in San Francisco.
Lord + Taylor closed its Fifth Avenue flagship store in Manhattan at the beginning of the year and sold the building to We Work.
Helena Foulkes, HBC’s CEO, said, “We’re excited to have reached an agreement with Le Tote that creates a new model for Lord + Taylor, bringing together fashion rental subscriptions with traditional retail. Following an extensive review of strategic alternatives, Le Tote’s leadership and innovative approach is the best path forward for Lord + Taylor, its loyal customers and dedicated associates. For HBC, this transaction builds upon our previous bold actions, further enabling us to focus on our greatest opportunities, Saks Fifth Avenue and Hudson’s Bay.”
Rakesh Tondon, Le Tote’s CEO and Founder, said, “Since founding Le Tote, it’s been our mission to push the boundaries of retail. We’ve strived to lead the charge in developing innovative, intuitive, value-driven ways for customers to engage and consume. We’re excited to bring Le Tote together with Lord + Taylor, a storied brand that has stood for quality, style and service for nearly two centuries. With this acquisition, we continue our journey in creating the future of retail.”
Under the terms of the agreement, Le Tote will acquire the Lord + Taylor brand and related intellectual property while assuming operations of 38 stores, Lord + Taylor’s digital channels and the associated inventory.
Le Tote expects to extend employment offers to the vast majority of Lord + Taylor’s associates.
HBC will receive $99.5 million (USD$75 million) in cash upon the transaction’s closing and a secured promissory note for $33.2 million (USD$25 million) payable in cash after two years. In addition, HBC will receive an equity stake in Le Tote, two seats on the company’s Board of Directors and certain rights as a minority shareholder.
HBC and HBS Global Properties, HBC’s real estate joint venture, will retain ownership of all owned and ground-leased real estate assets related to Lord + Taylor. For at least the initial three years, HBC has agreed to maintain economic responsibility for the rent payments owed by Lord + Taylor at the locations operated by Le Tote. Net of HBC’s distributions from HBS Global Properties, HBC expects to continue to be liable for approximately $77 million in Lord + Taylor total cash rent on an annual basis.
Starting in 2021, HBC and Le Tote will have options to reassess the Lord + Taylor store network. This may include HBC recapturing select locations to determine their highest and best use, including possible redevelopment into mixed-use properties with a variety of services, experiences and retail offerings. HBC has hired a team of seasoned professionals to lead the planning and execution of any redevelopment, which is an inherently complex, capital intensive, long-term project. For any recaptured or returned stores, HBC retains long-term rent responsibility, risk and costs for redevelopment.
Le Tote is in the process of securing financing for the full purchase price. The transaction is expected to close before the start of the 2019 holiday season, subject to satisfaction (or waiver) of closing conditions. If committed financing has not been obtained within forty-five days following signing, HBC has the right to terminate the agreement.
Founded in 2012 by Brett Northart and Rakesh Tondon, Le Tote is backed by startup accelerator Y Combinator and has raised venture funding from Andreessen Horowitz, Google Ventures, Azure Capital Partners, Lerer Hippeau Ventures, Simon Venture Group, Sway Ventures, Epic Ventures, Arsenal Venture Partners, Funders Club and others.