By: Benj Gallander

Published: April 8, 2025

Who remembers Morgan’s? Probably not a lot of people.

Once upon a time, it was an 11-store department store chain, founded by Henry Morgan in 1845. Benj used to shop there with his mom back in the day, but he remembers the retailer less than the hot dog, fries and Coke he was allowed to indulge in after shopping.

In 1960, the Hudson’s Bay Company purchased Morgan’s, and in 1968, the Ontario stores were converted to a new name, the Bay. The Quebec locations followed in 1972.

Fast forward a few decades to 2006, when American Jerry Zucker bought HBC for $1.1-billion. In turn, it was acquired in 2008 by NRDC Equity Partners. In 2023, they sold real estate, what many considered to be the primary value of the company, and that netted them a gain of US$340-million. That was far more lucrative than vending clothes, as the HBC’s recent bankruptcy attests.

Today, the vast majority of the 9,364 employees who were on the company’s payroll have lost their jobs. The financial hit to these workers and their families is significant. Plus, this is the kind of event that does major damage to the Canadian economy, as an enormous amount of possible spending is eliminated. The trickle-down impact should not be underestimated.

The company also owes hundreds of millions of dollars, with the list of creditors stretching to 26 pages including Chanel, Columbia Sportswear and Diesel. Those sheets could read like a novella of Canadian industry.

RioCan Real Estate Investment Trust, the second largest REIT in Canada, will also be adversely impacted by the bankruptcy, as they co-own several HBC stores, and the RioCan-HBC joint venture had a carrying value of $249-million. It has also provided a loan guarantee and credit support to the tune of $88.7-million through their JV. But RioCan has protected its interest to a degree by obtaining security in some JV properties. Still, some pain will be felt.

While RioCan can protest, and their lawyers are doing so, it is unlikely that their view will amount to much. The REIT will take a hit, though HBC only contributed 3.2 per cent to net operating income. Ben does own shares in this outfit, but Benj never bought in.

Is RioCan a worthy buy now? It does not meet our normal criteria of 100 per cent plus initial sell target from the current price point just north of $17, but 50 per cent-plus does seem eminently reasonable. As usual, we have no time frame for this, but while waiting, the fat dividend is a good return on investment.

Eventually, just as happened with Morgan’s, the Bay will be largely forgotten. Sure, the iconic blankets might survive, but time tends to drown out history. The Bay will join a number of other major retailers that Canada has lost over the years, including Sears, Woodward’s, Eaton’s, Simpsons, Dylex and Zellers.

HBC competitor Eaton’s slogan was “Goods Satisfactory or Money Refunded.” The retailer opened gigantic downtown flagship stores in Canadian cities such as Montreal, Vancouver and Winnipeg, with some spanning almost a million square feet over eight or more floors. Until the 1950s, Eaton’s could claim to be the “largest retail organization in the British Empire.” That was then, this is now.

Ultimately the remnants of the chain were purchased by Sears Canada while in bankruptcy for $50-million. Eight flagship stores were renovated and reopened as Eaton’s. All of those stores have since closed.

Back in the day, we did own HBC. It proved to be a good investment for us, as it most certainly was for thousands of other people over the years. Fortunately, we sold during its heyday, and though consideration was given to buying it again, it did not happen.

While a fortune can be made by investing in retailers, one has to remember that the industry can be tricky and land on rocky shoals. There are many reasons for this, including poor management, a fat debt load or consumers’ appetites changing. Retail is a classic example of a sector where it is unwise to fall in love with a stock or hold without regular re-evaluation.

When an iconic company meets its demise, one that has had an impact on generations of Canadians, it is exceedingly unfortunate. HBC likely will not go away quietly, as lawyers battle from all sides so that different parties, including them, can obtain their pound of flesh.

The corporate motto was pro pelle cutem, meaning “a skin for a skin.” HBC is being skinned now.