April 5, 2017 / 2:15 PM / 4 months ago

Hudson's Bay explores 'major reinvention,' considers real estate IPO

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A man exits a Hudson's Bay department store in Toronto, Ontario, Canada June 6, 2016.Chris Helgren/File Photo

TORONTO (Reuters) - Canadian department store operator Hudson's Bay Co (HBC.TO) said on Wednesday it was looking at a "major reinvention" of its business operations and gave its strongest signal yet of a possible initial public offering of its real estate assets.

HBC shares, which fell more than 10 percent this week ahead of its fourth-quarter results, rose 7.7 percent to close at C$10.45 on Wednesday on the Toronto Stock Exchange.

"What we should've done and what we should be doing as quick as possible is IPO-ing our U.S. real estate portfolio and/or IPO-ing our Canadian real estate portfolio," said Chairman Richard Baker, adding that other options are still possible.

"Maybe in hindsight, we would have been better off IPO-ing the portfolio six months ago or eight months ago."

The timing for an IPO may not be ideal given expected rising U.S. interest rates and lower valuations for many U.S. retail-focused real estate companies.

The Saks Fifth Avenue and Lord & Taylor owner reported a fourth-quarter loss after markets closed on Tuesday. The results mirrored a trend in retail, especially department stores in the United States and Europe, which have been hurt by changing consumer trends and fierce competition.

Earlier this year, Hudson's Bay said it was undergoing an operations review and expected initial annualized savings of C$75 million. Executives told analysts that was a "first step" with more to come.

"It is a major league, full-time effort in our company right now," Baker said. "We're not just looking at a little tinkering with the business model. We are looking on major reinvention and change in the business."

Executives also reiterated to investors in a conference call that acquisitions remained part of Hudson's Bay corporate strategy. They would not comment on reports that Hudson's Bay was in exploratory talks with debt-laden luxury retailer Neiman Marcus Group, following a failed effort to bid for Macy's Inc (M.N).

"In no way would we do an acquisition that affected our debt ratios and impacted our existing business in a material way, but we do view ourselves as a global consolidator," Baker said from the Netherlands, where the company is planning to open more than a dozen Hudson's Bay and Saks OFF 5th stores.

Founded in 1670, Hudson's Bay began primarily as a fur trading business. It once owned more than 40 percent of what is now Canada and a significant portion of what became Minnesota and North Dakota.

Reporting by Solarina Ho; Editing by Peter Cooney and Leslie Adler

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