HBC raises $340-million as it falls behind on payments to suppliers

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Hudson’s Bay Co. has completed a series of real estate transactions in the United States and Canada worth US$340-million, cash that the company says will help to fund its retail operations after falling behind on payments to its suppliers.

The parent company HBC LP, which owns Hudson’s Bay, Saks Fifth Avenue and Saks OFF 5TH, confirmed the transactions in an e-mail to The Globe and Mail on Tuesday. Canada’s oldest retailer is using the cash to pay significantly overdue invoices to vendors.

“HBC is committed to its vendor partners, and to ensuring that we fulfill all financial obligations,” spokesperson Tiffany Bourre wrote in the statement, in response to questions from The Globe about the late payments. “Any delayed payments are due to HBC managing through the challenging environment that is impacting the wider retail industry, particularly in Canada.”

Sources at two companies in Canada who do business with Hudson’s Bay confirmed to The Globe that the retailer has fallen behind on payments in recent months, leading one of them to put product deliveries on hold. The sources asked not to be named because they have an continuing relationship with HBC, and are awaiting payment.

While 90-day payment periods are common in the retail industry, and it is not uncommon for retailers to fall slightly behind, HBC has been weeks or months late since last spring, according to the people who spoke to The Globe.

Earlier this week, industry publication The Business of Fashion reported that HBC’s U.S. chain Saks had been withholding payments from multiple vendors, citing unnamed sources. The sources told the publication that they had reduced the number of products they were shipping to Saks, or stopping shipments, while they awaited payment. The publication also reported the US$340-million transactions on Tuesday.

That report followed an anonymous claim on social media account Estée Laundry, which claimed Estée Lauder had stopped fulfilling orders from Saks as the company has failed to pay past invoices. Estée Lauder did not respond to a request for comment.

The news follows significant cutbacks at Hudson’s Bay: earlier this year, the retailer cut hundreds of jobs at its corporate offices in a bid to “streamline operations.”

Hudson’s Bay is working to resolve the issue with vendors as the crucial holiday shopping season ramps up, putting additional pressure on retailers to ensure stores are well-stocked, and to deliver to online customers on time. This year’s holiday season is already shaping up to be a challenging one for the industry, as shoppers stung by inflation cut back on spending and stores compete for customers with deep discounts.

In the statement sent on Tuesday, HBC placed the value of its North American real estate portfolio at approximately US$7-billion. HBC’s real estate arm, which is operated separately from the retail businesses, generates between US$300-million and US$500-million each year, partly by selling off some buildings it owns, as well as other sources of revenue such as payments from landlords for redevelopment of leased store space. The statement added that these transactions strengthen the company’s liquidity position.

“This valuable asset base and the incremental liquidity it generates strengthens our operating businesses as we focus on sound fiscal management and strategic growth initiatives,” Ian Putnam, the president and CEO of HBC Properties and Investments, said in an e-mailed statement.

HBC also raised capital by splitting off the e-commerce operations of the store chains it owns into separate businesses, and selling stakes in those digital operations. In 2021, the company raised US$500-million when it sold a stake in the online business of its Saks department stores. The company said at the time that US$200-million of those proceeds would be used to strengthen its balance sheet. A few months later, the company sold another stake, this time in SaksOff5th.com, for approximately US$200-million