Iconic Hudson’s Bay Company Fails to Make Rent Payments as Pandemic Continues to Ravage Brick-and-Mortar Retailers

Over the years, Canada has been home to some iconic shopping experiences, including Eaton’s department store, Sears, and the Hudson’s Bay Company. Although many have succumbed to the eventual demise of catalogue shopping, poor management, and the growing popularity of big box stores such as Walmart, Hudson’s Bay has been one of the only historic department stores that has thus far remained relatively immune to the changing consumer landscape. However, it appears that the effects of the coronavirus pandemic may be about to change that, as now the 350 year-old retailer has stopped paying rent.

The coronavirus pandemic has proven to be especially difficult on brick-and-mortar stores not only across the US, but Canada as well. Indeed, the company that owns the iconic Hudson’s Bay Company stopped making its rent payments shortly after the pandemic started, and now some of the company’s flagship stores across Canada and the US are facing eviction. According to court documents, several prominent landlords, including Oxford Properties, Morguard REIT, SmartCentres REIT and Cominar REIT, have taken HBC to court over several months worth of unpaid rent. Some of the landlords have called on HBC’s eviction, while others have refrained from explicitly kicking the iconic retailer out.

HBC has not made its rent obligations at over 20 different locations across Canada, but evicting such a large retailer may prove to be bigger dilemma than many landlords want to take on. Part of the problem faced by landlords is that HBC acts as an anchor tenant in a shopping mall, consuming a significant amount of space that tends to attract a wide array of customers. In a typical mall setting, smaller retailers would take up occupancy along the corridors leading to the anchor tenant, and have co-tenancy leases which make their lease obligations contingent on the occupancy of the anchor tenant.

In the event of the anchor tenant disappearing, a significant portion of customer traffic also declines as a result, which ultimately would allow the smaller retailers to get out of their lease obligations. This would certainly not be a favourable situation for the landlords, especially after many of them are still facing the financial aftermath following the closing of big-box stores Target and Sears back in 2015 and 2017, respectively.

However, it appears that the financial disputes between HBC and its landlords continues to escalate, with The Bay store in Coquitlam, BC closing its doors over the weekend. According to a Toronto Star report published recently, court records suggest that HBC’s leases are worth $20 million per month, with the company failing to make its rent obligations to eight of its landlords in British Columbia, Quebec, Ontario, and Florida. According to company records filed in court, the department store company has seen its sales decline by $11 million between March and October, largely due to the retail shopping fallout stemming from the pandemic.

Although at one point the iconic HBC stores certainly served to attract a wide array of consumers, but now it appears that those times are quickly fading. In fact, even before the pandemic, the changing consumer landscape was eroding brick-and-mortar store revenues, putting many concentrated in fashion retail out of business. The increased competition from online shopping, and now lockdowns and social distancing mandates as a result of the pandemic are creating an unfavourable situation for many, including an iconic piece of Canada’s history.


Information for this briefing was found via the Toronto Sun. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply

Share
Tweet
Share
Reddit