Hudson’s Bay Company (HBC) is selling Lord & Taylor for $100 million to Le Tote, a clothing rental subscription service, the New York Post reported on Wednesday (Aug. 28).
Lord & Taylor is the oldest department store chain in the U.S. and was acquired by Toronto-based Hudson’s Bay in 2006. The firm will retain ownership of the store’s real estate, while San Francisco-based Le Tote will take over the 38 Lord & Taylor stores, its digital channels and its inventory.
The deal allows the department store chain to continue operations and potentially transform its approach to boost falling sales and reach today’s shoppers.
“We’re excited to have reached an agreement with Le Tote that creates a new model for Lord & Taylor, bringing together fashion rental subscriptions with traditional retail,” HBC Chief Executive Helena Foulkes said in a statement.
Hudson’s Bay will have a minority stake in the new enterprise. The deal gives them the right to reclaim some stores in 2021.
Le Tote’s fashion subscription service was founded in 2012 and provides unlimited clothing and accessory rentals for a flat monthly fee, curated using a proprietary algorithm. The company is still lining up financing for the Lord & Taylor deal, which calls for HBC to receive $75 million in cash and another $25 million after two years.
Subscriptions are the hottest new trend in the fashion industry. The model is appealing to retailers that are under pressure to adapt to shifting consumer preferences before certain styles and designs lose favor.
Consumer spending on clothes has trended downward in recent years; some accounts have estimated that it makes up only 3.1 percent of household spending, which is considerably less than the amount consumers drop on food and entertainment.
The digital clothing rental services market is already highly valuable. It was worth approximately $1 billion in 2017 and is on track to grow at a compound annual growth rate (CAGR) of 10.6 percent from 2017 to 2023, reaching a value of $1.85 billion.