TORONTO – A U.S. investment firm is calling for the removal of the current board of directors at Hudson’s Bay Co. (TSX:HBC), and taking particular aim at executive chairman Richard Baker because he “continues to call the shots.”
Hudson’s Bay management has been under pressure for months from Land & Buildings Investment Management, which argues HBC’s stock price is far below the underlying value of its real estate holdings.
Land & Buildings said it estimates HBC’s real estate is worth $35 per share while its share price was worth $11.96 at the end of last week when HBC said chief executive Gerald Storch would be leaving Nov. 1. HBC closed Monday at $11.75, down nearly two per cent from Friday.
Jonathan Litt, who is chief investment officer and founder of Land & Buildings, said Monday in the statement that HBC’s problems won’t be resolved by the departure of Storch, a former Toys R Us chief executive who joined Toronto-based HBC in January 2015.
HBC didn’t respond to requests for comment on the statement by Land & Buildings.
Since Storch’s arrival, with Baker as executive chairman of the HBC board, the company has worked to expand its sales through digital channels, spread its Saks Fifth Avenue brand into Canada, and expand the Hudson’s Bay brand into Europe.
But in June, HBC announced a $221 million loss in the first quarter and said it would eliminate 2,000 jobs in response to a challenging retail sector. Its second quarter included a $201 million net loss that Storch described as “very disappointing.”
Litt’s statement said that the departure of Storch and other senior executives may be a seen as a reason for investors to give the company “more time to right the ship — while choosing to ignore the fact that the true decision makers and those at the board level who have been complicit in the decision making remain in power.”
“In reality, executive chairman Richard Baker, who will be taking on the role of interim CEO, continues to call the shots.”
Litt also repeated his position that HBC is really a real estate company, not a retailer, that has failed to outline a plan to unlock the “substantial real estate value trapped in the company.”
Land & Buildings said it will call for a special meeting of HBC shareholders to consider a full slate of proposals, including a new board of directors.
Under the Canada Business Corporations Act, shareholders with five per cent of a federally regulated public company’s stock are entitled to call for a special meeting.
According to the most current information, Land & Buildings has more than four per cent of HBC’s outstanding stock. An offshore company controlled by Baker and his family owns about 17.2 per cent of HBC’s equity.