What: Private equity's leveraged buyout strategy has led to the collapse of North America's oldest retailer, Hudson's Bay, highlighting the broader risks of prioritising real estate assets over retail operations.

Why it is important: This case exemplifies the systemic risks of private equity's retail strategy, particularly as other major department stores face similar pressures to monetise real estate assets while struggling with digital transformation.

The collapse of Hudson's Bay, North America's oldest retailer, marks the end of a 350-year legacy and highlights the devastating impact of private equity's leveraged buyout strategy in retail. Under NRDC's ownership since 2008, the company's focus shifted toward real estate assets rather than retail operations, leading to nearly CAD$1 billion in debt. The bankruptcy filing will result in approximately 9,000 job losses and the invalidation of CAD$58 million in customer loyalty rewards. While external factors such as online shopping, middle-class contraction, and tariffs contributed to the company's demise, the private equity ownership model played a crucial role. Through financial engineering and asset stripping, the company neglected essential operational investments, leading to deteriorating store conditions and customer service. This pattern mirrors similar outcomes in other private equity-owned retailers, where the focus on debt servicing and real estate assets ultimately undermined the core retail business.

IADS Notes: Recent retail developments underscore these challenges, as seen in December 2024 when HBC completed a $2.65 billion acquisition of Neiman Marcus. By February 2025, this led to the closure of historic locations as part of a $500 million cost reduction strategy. Meanwhile, other retailers like Macy's face pressure to monetise their real estate portfolios, highlighting how the industry continues to grapple with balancing property assets against retail operations.

How private equity failed Hudson’s Bay