Hudson’s Bay Company (HBC) will sell Lord + Taylor to Le Tote, a fashion rental subscription service, for $99.5 million. Additionally, HBC will receive an equity stake in Le Tote and two seats on the company’s board of directors.
Le Tote will acquire the Lord + Taylor brand and related intellectual property, 38 stores and the retailer’s digital channels and associated inventory. The subscription retailer also plans to extend employment offers to the majority of Lord + Taylor associates.
HBC will retain ownership of all owned and ground-leased real estate assets related to Lord + Taylor and will maintain responsibility for rent owed by Lord + Taylor stores operated by Le Tote. Starting in 2021, HBC and Le Tote will have options to reassess the Lord + Taylor store network, which may include HBC repurposing select locations for uses including redevelopment into mixed-use properties.
The merger of Lord + Taylor’s traditional store footprint and e-Commerce selection with Le Tote’s subscription platform is a natural fit, according to Richard Kestenbaum, Co-Founder and Partner at Triangle Capital LLC in a Forbes editorial. “Risky” high-fashion items draw attention and traffic to stores, but are less likely to actually drive conversions. Recycling unused apparel into a rental option saves retailers the trouble (and potential risks) of running extra promotions.
“Renting high-fashion garments addresses the risk problem in a way that works for both consumers and retailers,” said Kestenbaum. “It lets a woman have access to the garment when she needs it but she doesn’t have to commit to own it or to pay the full price for it. By putting a garment that would otherwise be marked down into a rental cycle, the retailer can get their full margin on the dress.”
The addition of a major retailer could also supercharge Le Tote’s rental business as a whole, according to Jonathan Treiber, CEO of RevTrax. Even a reduced version of Lord + Taylor’s footprint could vastly expand the number and visibility of rental options and form the basis for an entirely new retail model.
“It’s an opportunity to make a big splash very quickly to double down on Le Tote’s future of retail, one where customers will be able to walk into a big box store and rent thousands of items versus their current more limited online assortment,” said Treiber in commentary emailed to Retail TouchPoints. “They have an opportunity to single-handedly disrupt traditional department stores and physical retail with this acquisition and turn L&T from a struggling mid-market department store into a thriving leader of the new retail economy. Le Tote is banking on the fact that L&T’s issues are limited to business model, not assortment, buying and merchandising.”
The transaction is expected to close before the start of the holiday season, subject to closing conditions. If committed financing has not been obtained within 45 days following signing, HBC retains the right to terminate the agreement.