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Helena Foulkes sold businesses and helped pave the way for Hudson’s Bay to go private

Hudson’s Bay Co. ’s chief executive is leaving the company, according to people familiar with the situation, following a deal it reached last week with shareholders to go private.

Helena Foulkes joined the parent of Saks Fifth Avenue from CVS Health Corp. in 2018 and helped streamline the retail conglomerate by selling businesses and improving operations. Ms. Foulkes, 55 years old, is expected to depart on March 13, one of the people said. Richard Baker, Hudson’s Bay executive chairman, will become CEO, the person said.

In a press release, Hudson’s Bay confirmed Ms. Foulkes’s departure and also said that its privatization transaction had closed.

Shareholders last week approved a transaction with an investor group that includes Mr. Baker to take the company private for 11 Canadian dollars a share, or roughly US$8.25.

Mr. Baker is a real-estate executive who entered the fashion business in 2006 when his investment firm paid $1.2 billion for Lord & Taylor. He built a conglomerate that included the Hudson’s Bay retail chain in Canada, Saks Fifth Avenue, German department-store chain Galeria Kaufhof and online flash-sale retailer Gilt Groupe.

Most of those businesses were later sold to focus on improving the operations of Saks and Hudson’s Bay, which were struggling in the face of competition from online upstarts and other rivals.

Marketing, public relations and other shared functions were decentralized, allowing the businesses to operate independently, one of the people said. Going forward the company will be structured more like a holding company with the presidents of Saks and Hudson’s Bay running their respective businesses, the person said.

Department stores have had a particularly hard time reinventing themselves in a world where shopping has shifted online. Macy’s Inc. plans to close 125 stores over three years and recently laid off about 2,000 employees. And Barneys New York filed for bankruptcy last summer, though its brand is living on in departments located in some Saks stores.

Hudson’s Bay in 2017 became the target of activist investor Land & Buildings Investment Management LLC, which urged the company to maximize the value of its real estate by turning its retail space, including its Saks Fifth Avenue flagship in Manhattan, into office towers, hotels or other types of boutiques.

Following the departure of then-CEO Gerald Storch in 2017, Hudson’s Bay hired Ms. Foulkes, who had spent more than 25 years with CVS, most recently as president of its pharmacy division. Ms. Foulkes was a key part of CVS’s decision in 2014 to discontinue sales of tobacco products.

At Hudson’s Bay, Ms. Foulkes jettisoned Gilt, Kaufhof and other European operations, as well as Lord & Taylor, paving the way for the company to go private.

The divestitures raised C$2.4 billion in proceeds, of which C$1.6 billion was used to pay down debt.

Total revenue slipped less than 1% to C$5.55 billion in the nine months that ended Nov. 2. The net loss widened to C$935 million from C$823 million a year earlier.

Mr. Baker has said it would be easier to pull the company out of its slump away from the public eye.

“This is the time in retailing to reinvent, to upgrade our presence online and in stores, and create a better, more exciting company. Being private, we’ll be able to do that,” he said in an interview last week.

With Mr. Baker’s strong real-estate background, the company is expected to look at new ways to unlock value from its properties going forward, one of the people said.

New, less risk-averse owner expected to pursue acquisitions in healthcare marketing

Ever asked a medical researcher what they do for a living and zoned out during the reply? Huntsworth aims to fill the communications gap between big pharma and the public. Clayton, Dubilier & Rice values the specialisation at £515m, judging by an offer for the UK PR group that includes net debt.

The bid from the US buyout group values Huntsworth at almost 14 times estimated earnings. That is well above a rating of less than 10 times that shares have at traded at in recent years. The stock has been caught up in a market rout of big advertising groups such as WPP and Publicis. Huntsworth shares soared by more than half on Tuesday.

The deal, at a 46 per cent premium to the three-month average, is a relief for investors and chief executive Paul Taaffe. Former boss and David Cameron confidante Peter Gummer stepped down in 2014 amid steep losses. Mr Taaffe has overseen a turnround, tilting the group towards healthcare. The sector now accounts for 85 per cent of profits.

Competition in US healthcare means drugmakers spend about $30bn a year on marketing. Ageing populations are fuelling demand for new treatments. Huntsworth eyes becoming a one-stop marketing shop for pharmaceuticals communications. That would fuel growth in revenues from $340m at present. 

CD&R likely spies an opportunity for Huntsworth to grow through acquisitions in healthcare marketing. This is a fragmented industry comprised mainly of small boutiques.

The private equity group will tolerate much higher net debt than public market investors. They grumbled when a string of acquisitions took the total close to two times trailing ebitda in March last year, forcing Huntsworth to pull in its horns.

On the stock market, piecemeal acquisitions of marketing businesses are almost as unpopular as high debt. WPP, the best-known exponent, is partly unwinding its empire. Huntsworth was also paying the penalty that comes with being a specialist business with few obvious comparatives. Long funds are as bemused by esoteric mission statements as Joe Public is by scientists’ job descriptions. Huntsworth should be better off under its new, less risk-averse owners. 

Blume says industry faces supply constraints because of production ‘bottleneck

The chief executive of Porsche has warned the cost of lithium-ion batteries, by far the most expensive component in an electric car, is unlikely to drop for at least five years, complicating carmakers’ attempts to generate profits from emissions-free models.

Oliver Blume, whose company has just begun delivering its first battery-powered sports car, the Taycan, told the Financial Times the industry would face supply constraints for the “next few years”.

“I don’t expect decreasing costs in batteries, because there is a big demand and we still have a bottleneck in production capacities,” he said.

Although Porsche has fixed contracts with battery suppliers such as South Korea’s LG Chem, Mr Blume raised the possibility that rivals could see their price soar, before the electric car market becomes big enough to benefit from economies of scale. Porsche is part of the Volkswagen Group and Mr Blume sits on the VW board.

The forecast will frustrate many European car manufacturers, who must sell hundreds of thousands of electric vehicles over the next few years to comply with EU regulations. 

The industry had been hoping that battery-powered models, which are sold either at a loss or for very small returns, would begin making money as the cost of their core technology plummeted.

Porsche’s own Taycan, which is the first European rival to Tesla’s Model S, will not be profitable for a few years, Mr Blume confirmed, despite already securing 30,000 orders.

The rapid growth of electric vehicles, spearheaded by VW’s ambitious plans to produce 26m emissions-free cars in the next nine years, is expected to almost quadruple the global demand for batteries by 2025.

The German group is investing in its own, domestic cell-building facilities, in conjunction with Swedish developer Northvolt, but is largely reliant on Asian battery suppliers, which dominate the industry.

Europe is staging a late surge into battery manufacturing, with the likes of BASF and Opel receiving state aid to build so-called gigafactories on the continent, but those facilities are unlikely to come online for a few years.

Nonetheless, VW’s boss Herbert Diess told the FT last week that the carmaker had secured enough battery supply to see it through until 2023, by which point it hopes to have produced 1m electric cars. 

Those comments came as production of emissions-free vehicles at Audi, one of VW’s brands, in Belgium was forced to a halt because of delays in the delivery of battery cells.

“That’s a typical thing that happens when you ramp-up a new technology,” said Hildegard Wortmann, Audi’s board member responsible for sales. 

But Ms Wortmann, who earlier in her career helped launch BMW’s electric models, warned that the price of Audi’s battery-powered models were unlikely to drop, even if battery costs were reduced.

“Whenever we get cost savings in terms of scalability,” she said, “[Audi will invest] into better cell performance and cell intensity etc to build on the reach.” 

Ms Wortmann added that electric models would need to have a reach of about 500km before the savings in battery costs could be passed on to consumers.