Fate of Hudson's Bay still up in the air as extension on liquidation plan granted until Friday
Shoppers descend on stores as official approval of liquidation plan is delayed
Whether or not Hudson's Bay Company will have to undergo a full liquidation or be able to keep some stores afloat while it restructures is still unknown — the indebted retailer has received another extension from an Ontario judge that will push the decision to the end of the week.
Ashley Taylor, lawyer for Hudson's Bay, addressed a Toronto courtroom on Wednesday to request an extension on the formal approval of the liquidation plan until Friday, saying that the company was still engaging with stakeholders and having "good, constructive discussions."
Canada's oldest company officially filed for creditor protection earlier this month, admitting it was struggling with financial difficulties. Taylor said at the time that the retailer was hoping to restructure by liquidating half its stores and monetizing some of the leases it holds in areas of prime foot traffic.
However, they were unable to secure the funding from lenders that would be required to finance that restructuring, leaving the company scrambling and facing a full liquidation.
Meanwhile, amid the corporate chaos, shoppers in many regions of Canada are acting as though liquidation sales have already started, with stores seeing empty shelves and increased crowds.
More than 9,000 workers stand to lose their jobs if the company liquidates all of its 80 stores, online offerings and the three Saks Fifth Avenue and 13 Saks Off 5TH stores that Hudson's Bay operates in Canada under a licensing agreement.
The deeply indebted retailer owes nearly $1 billion to creditors.
It outlined in a news release on March 14 that a store-by-store liquidation process would begin following court approval, and that it could take up to 12 weeks. The court was originally slated to reveal its decision on Tuesday.
Taylor stated in Wednesday's proceedings that the company had enough liquidity to keep operations going until Friday, but added that they may be ready to approve a plan as early as Thursday.
Hudson's Bay Company is entrenched in Canadian history — founded in 1670 by fur traders, the company, in its original form, once owned a wide swath of northern Canada around Hudson Bay. In its modern form, its department stores were once bustling sites of commerce, hosting countless brands, along with its own branded lines of clothing and goods.
How a liquidation sale works
According to the news release from Hudson's Bay, department stores and the associated Sask Fifth Avenue and Saks Off 5th stores will remain open during the liquidation process. Customers will also, for a limited time, still be able to purchase goods on TheBay.com.
Unlike a clearance sale, where retailers may offer steep discounts fast to make room for new products and accept store credit in place of returns, a liquidation sale is more likely to start out with smaller price drops that grow larger as the deadline approaches, and all sales are final.
Products that normally come with a warranty, like appliances, won't have those and may be more steeply discounted compared to clothing or shoes, according to Philip King, a lawyer who lectures on business law at Western University.
King told CBC News that once the liquidation process is underway, Hudson's Bay will likely try to offload as much as they can to wholesalers.
It would cost more to ship products from their warehouses to stores, so these will be sold to "anybody who will buy large lots of merchandise," such as liquidators, in order to help recover more costs faster.
In the stores, the more desirable products will likely get picked up first, even in the absence of large discounts, so anyone hoping to get a specific product shouldn't wait, he advises.
Workers worried for their jobs
Something that shouldn't get lost in the shuffle, King pointed out, is who stands to lose the most if Hudson's Bay liquidates: the workers.
"It's not just about earnings per share and returns for creditors and shareholders," he said. "At the end of the day, this is a very personal story for thousands and thousands of people."
While there are some protections available for workers, in liquidation cases like this, he says they're unlikely to get as much severance as they're owed.
"For someone who's worked there for 20 years and has a lot of seniority and a lot of severance entitlement built up, they won't be getting anything near what they ought to be getting."
Andrew Hatney, a lawyer for the employees, stated in the courtroom Wednesday that he "was not happy to hear that liquidation is still on the table," encouraging the company to keep working to find other solutions.
"This type of job loss will be a disaster for Canada."
Speaking to CBC News after the hearing, Hatney said that it might look like a "normal day of shopping" when customers walk through a Hudson's Bay store, "but when we talk to the employees, it's not business as usual."
"They're very worried for their jobs."
Stores already seeing empty shelves
Even though official liquidation sales haven't started yet, shelves are already looking bare at many Bay locations.
In Toronto, shoppers were looking for sales earlier on Tuesday. One such hopeful, Richard Bryce, told CBC News that he'd specifically headed to The Bay when he heard about the possible liquidation.
"Very sad," he said. "But given the uncertainty in the economy, I think Hudson's Bay has struggled for some time."
At one of the company's department stores in downtown Vancouver on Wednesday, shoppers descended on a display of the iconic Hudson's Bay point blankets, emblazoned with the green, red, yellow and navy blue stripes that have become the brand's trademark. Within minutes, they had sold out.
Andrew Shirley, a shopper who came to check out The Bay's offerings said he grabbed "pretty much the last item with the iconic stripes" left in the store.
His prize? A robe.
"Everything else has been completely cleaned out."
ABOUT THE AUTHOR
