Hudson's Bay Corporation, which owns Saks Fifth Avenue, announced it has reached an agreement to sell Lord & Taylor, founded in 1826, to seven-year-old apparel rental subscription service Le Tote, Inc. for $100 million.
Hudson’s Bay will be paid C$99.5 million (US$75 million) in cash after the deal closes and a secured promissory note of C$33.2 million (US$25 million) payable in cash after two years. In addition, it will receive an equity stake in Le Tote, two seats on its board and certain rights as a minority shareholder.
Le Tote will acquire the Lord & Taylor department store brand and related intellectual property while assuming operations of 38 stores, Lord & Taylor’s digital channels and the associated inventory.
“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,” said Helena Foulkes, HBC’s CEO. 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.”
Founded in 2012, Le Tote, which lets women rent clothing and accessories for a flat monthly fee, employees a data-driven model powered by proprietary algorithms and in-house operational solutions. Le Tote’s proprietary technology, data and innovation combined with Lord & Taylor’s traditional store footprint, e-commerce presence and merchandise selection will offer customers a new experience in the mid-market segment, according to Hudson’s Bay.
The sale comes at a time when traditional retailers such as Banana Republic and Urban Outfitters are launching their own retail subscription services.
“Since founding Le Tote, it’s been our mission to push the boundaries of retail,” said Rakesh Tondon, Le Tote’s CEO and founder. “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.”
Hudson’s Bay and HBS Global Properties, the company’s real estate joint venture, will retain ownership of all the owned and ground-leased real estate assets related to Lord & Taylor. For at least the initial three years, Hudson’s Bay will maintain economic responsibility for the rent payments owed by Lord & Taylor at the locations operated by Le Tote. 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.
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.