Hudson’s Bay Company (HBC), which acquired Gilt Groupe for $250 million only two years ago, agreed to sell the flash sale business to Rue La La for less than $100 million. Gilt, which was once valued at more than $1 billion, has seen its value plummet as much of the enthusiasm tied to flash sales sites continues to wane.
Rue La La plans to hire 150 employees to run the Gilt business following the close of the deal, which is expected at the end of July.
The combined company, which will operate under the name Rue Gilt Groupe, will have a more than 20 million customer database. Sales at the two companies are expected to reach approximately $1 billion annually, according to The Wall Street Journal. Gilt targets more upscale, urban shoppers, while Rue La La caters to a wider audience.
The Gilt sale is the latest sign that HBC is focused on abandoning unprofitable assets. The department store noted that Gilt took a $63 million loss in Q4 2017, indicating that companywide digital sales would have grown by 9% in the period — instead of just 2.8% — if Gilt had been excluded.
HBC, the parent company of retail companies including Hudson’s Bay, Lord & Taylor and Saks Fifth Avenue, will vacate the Lord & Taylor flagship store on Fifth Avenue in New York City. HBC ceased retail operations in the building after the 2018 holiday season, with the sales of the property to WeWork for $850 million, but still had the option to lease back space in the building.
Additionally, HBC has reported the potential closing of up to 10 more unidentified Lord & Taylor stores.
The moves signal Hudson’s Bay’s willingness under new CEO Helena Foulkes to exit from money-losing businesses while its share price is under pressure and an activist investor is calling for the company to better monetize its real estate. HBC’s net loss widened to $242.8 million in Q1 2018, with the retailer noting that comparable sales declined 0.7% from a year ago, while total revenue only jumped 1%.
In 2017, prior to Foulkes’ appointment to the CEO position, HBC axed 2,000 jobs, reorganized management and centralized e-Commerce operations under a plan to win back customers that had turned away from its brands.
“Hudson’s Bay has taken steps to streamline and improve its business through the announced divestiture of Gilt and its reduction of square footage at Lord & Taylor,” said Christina Boni, VP and Senior Credit Officer of Moody’s in commentary provided to Retail TouchPoints. “These efforts are expected improve profitability and bring a better balance between its brick-and-mortar and digital assets.”
HBC also announced the sale of Gilt Japan to Gladd, a Japan-based online flash sales platform.