Le Tote to Buy Lord + Taylor from Hudson’s Bay Company for $100M
Combining traditional retail with clothing rental subscriptions
Le Tote, Inc., an online clothing rental subscription startup, has agreed to buy the Lord + Taylor luxury department store chain from parent company Hudson’s Bay Company (HBC) for $100 million. Le Tote will pay $75 million at the time the sale closes with the remaining $25 million, payable in cash in 2021. Le Tote is working on acquiring financing for the full sale price. If financing has not been secured within 45 days after signing, HBC has the right to terminate the deal.
The acquisition is expected to close before the beginning of the 2019 holiday season, subject to standard closing conditions. As part of the agreement, HBC will receive an equity stake in Le Tote, two seats on the company’s board of directors, and rights as a minority shareholder.
“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 CEO, in an August 28 news release.
“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,” added Foulkes.
Le Tote will take over the Lord + Taylor brand, intellectual property, the operation of 38 retail stores, Lord + Taylor’s digital channels and related inventory. The majority of Lord + Taylor employees will be offered jobs with Le Tote. Five stores will be closed, reports The New York Times. Part of the deal gives the companies the option to reassess the Lord + Taylor stores in 2021. HBC may choose to “recapture” select locations which may include the redevelopment of those properties.
“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,” said Rakesh Tondon, Le Tote CEO and founder.
Founded in 2012, Le Tote is a fashion subscription service catering to women’s fashions that allows subscribers to rent clothing and accessories for a flat monthly membership fee, starting at $79* (classic) or $89* (maternity). Subscribers look at various styles and choose the items they want to rent. Those items are sent as a “tote” direct to subscribers with free two- to three-day priority shipping. Subscribers can wear the clothing and accessories as many times as they want, returning the pieces when they are done with them or keeping them for 50% off the retail price. [Editor’s note: On Le Tote’s “How It Works” page, pricing is listed at $79 and $89, but in the FAQs, the site was $69 (classic) and $79 (maternity).
Lord + Taylor was founded in 1826 and has been a well-known department store brand for nearly 200 years. Le Tote and Lord + Taylor don’t necessarily sound like a good fit, but Tondon said the deal came from conversations Le Tote had with the retailer about developing clothing rental and subscription services. The marriage of the two companies will bring new technology to the department store, while Le Tote will have new brands and products to offer its subscribers, says The New York Times.
For fiscal year 2018, HBC reported $9.4 billion in retail sales. Lord + Taylor represented $1.4 billion, or 14.9%, of that total. Adjusted EBITDA was $462 million, including a $119 million loss attributable to Lord + Taylor.
The face of retail is changing as department stores like Lord + Taylor struggle to adapt to consumers’ new shopping habits. Today’s savvy shopper wants quality, convenience and options which include online shopping, door-to-door subscription services and clothing rentals. With Lord + Taylor sustaining significant losses, and competitors like Macy’s and Bloomingdale’s going the subscription rental route, the acquisition by Le Tote may be the best opportunity Lord + Taylor has of sustaining itself. With HBC retaining some control of its assets, Le Tote and HBC can reevaluate in 2021 to see how to best move forward.