In what is being called a “sign of the times,” the nearly 200-year old Lord & Taylor is being acquired by a fashion rental company that is barely a decade old. Hudson’s Bay Co. revealed on Wednesday that is selling its storied department store chain to rental co. Le Tote, Inc. for about $100 million, as the company streamlines its portfolio in order to “focus on luxury department store chain Saks Fifth Avenue and Hudson’s Bay in Canada [and] shore up its finances as shoppers skip brick-and-mortar stores to shop online instead,” according to Reuters.
Lord & Taylor, which got its start in New York in 1826, has been losing money since 2016,” per CNN, with sales dropping year-over-year. While the retailer was once the cornerstone of Toronto-based Hudson Bay's empire, one that includes Saks Fifth Avenue and German chain Galeria Kaufhof, the ailing retailer has increasingly fallen out of favor as consumers spend more time and money shopping online, and as its lower-priced rivals have continued to grow.
On the other hand, San Francisco-based Le Tote is part of the “small but fast-growing” apparel rental sector. Founded in 2012 by former investment banker Rakesh Tondon and boasting backers that include “venture-capital firms Andreessen Horowitz, Google Ventures, Azure Capital Partners, Lerer Hippeau Ventures and Simon Venture Group,” Le Tote and rivals, such as Rent the Runway, are cashing in as consumers, particularly of the millennial demographic, “are eager to wear new looks frequently and are not always keen on buying pricey outfits to wear just once or twice,” Reuters stated on Wednesday.
The clothing rental market as a whole is still a very niche market. The segment was valued at an estimated $1 billion in 2017 – which is how much Lord & Taylor made last year, alone. However, unlike traditional retail, the rental market is in the midst of double-digital growth, and is expected to reach $2.5 billion in sales by 2023, according to GlobalData Retail, and grow further thereafter.
As for what Le Tote – which will acquire the Lord & Taylor intellectual property, and assume operations of 38 stores, Lord & Taylor’s digital channels and the associated inventory – has planned for the ailing retailer, Tondon said on Wednesday, “We want to keep the Lord & Taylor brand (and) energize it, (but) not change too much too quickly.”
Specifically speaking, Le Tote will install “drop-off points for its apparel rental business in [Lord & Taylor’s stores], in its first move into bricks and mortar,” Reuters reports, and will “use its technology to improve product recommendations and personalized shopping experiences at Lord & Taylor.”