Hudson’s Bay Company

401 Bay Street
Toronto, Ontario M5H 2Y4
Canada
(416) 861-6112
Fax: (416) 861-4720

Public Company
Incorporated: 1670
Employees: 60,000
Sales: C$4.97 billion (US$4.28 billion)
Stock Exchanges: Montreal Toronto

Hudson’s Bay Company is Canada’s oldest corporation. On May 2, 1670, King Charles II granted 18 investors a charter incorporating them as the Governor and Company of Adventurers of England. In its first century, the company traded with the North American Indians, established forts on Hudson Bay, and successfully fought with U.S. and Canadian competitors to build its fur trade. By the early 1990s, in a coast-to-coast operation accounting for 7% of Canadian retail sales, excluding food and automobiles, the company owned and managed 483 stores in three retail divisions: the Bay, Zellers, and Fields. At the end of the 1980s, retailing assets generated net annual earnings of approximately C$168 million on revenue of C$4.59 billion.

The development of the company is tied to the growth of Canada and settlement of its western region. Those who were important to the development of the company were also important politically and historically to the economic and political growth of the New World. The list of well-known people associated with the company is long and includes Peter Skene Og-den, Solomon Juneau, Henry Kelsey, James Knight, Samuel Hearne, Peter Pond, Alexander Mackenzie, Sir George Simpson, Sir James Douglas, John McLoughlin, and others. The chartering of the company on May 2, 1670, with Prince Rupert—a cousin of Charles II—as the company’s first governor, followed the successful fur trading voyage of the ketch Nonsuch that brought back beaver pelts for the English market, used by felters and hatters to make the beaver hats that were fashionable at the time.

The Adventurers’ charter of 1670 gave it 1.49 million square miles of virgin territory, or nearly 40% of today’s Canadian provinces, including what would become Ontario, Quebec north of the Laurentian watershed and west of the Labrador boundary, Manitoba, the better part of Sakatchewan, southern Alberta, and much of the northwest territories. The group’s rights to the lucrative fur trade did not go uncontested, and it was not until 20 years later that the company made its first inland expedition. Henry Kelsey, an apprentice who joined the company in 1677 and who later became a company governor, made the first journey into the prairie in 1690, learning the Cree language, and adapting to Indian life. He wished to encourage peace among the Indian tribes so that they could bring beaver pelts to the forts without being attacked. Three forts on James Bay—Rupert’s House, Moose, and Albany in the east—and a fourth, York Factory, on the west coast of Hudson Bay were the sites of battles for nearly 30 years between the French and English contesting the territory and the right to conduct trade. The Treaty of Ryswick in 1697 brought peace, but by then the company was near ruin. Most of the company’s first century of business was devoted to establishing forts and territorial rights and making peace with the Indians and the French merchants who wanted to be a part of the fur trade in the New World.

One of the Hudson’s Bay Company’s fiercest early competitors was North West Company, established in 1779 by a Scottish-Canadian group of nine traders that moved into the Canadian interior around 1780 and claimed to be the rightful successor to the early French traders who had opened up the land. North West Company had two types of shareholders: the eastern partners, merchants in Montreal and Quebec who supplied the venture capital, and the “wintering” partners, who became responsible for exploratory and sales operations. By 1800 North West became a serious competitor, forcing Hudson’s Bay Company to become increasingly more adventurous, pushing the trade boundaries westward from the Hudson Bay, in fear of losing trade with the western Indians. Each company drove the other toward new expeditions, so that by the turn of the century, they each had men trading on the upper Missouri River.

North West’s Alexander Mackenzie, who later was knighted, was the most famous fur trader of his day. Mackenzie pushed the trade boundaries farther westward. Several of his trade expeditions were historical achievements: in 1789 he covered 1,600 miles and back in 102 days, and in 1793, he crossed the Rocky Mountains to reach the Pacific Ocean.

Other companies also envied the apparent monopoly of Hudson’s Bay Company. U.S. traders wanted a share in the fur trade following the Lewis and Clark expedition of 1804 to 1806. In 1808 Pierre Chouteau, William Clark, and five others established the Missouri Fur Company, and in New York John Jacob Astor, the leading fur dealer in the United States, started the American Fur Company, capitalized at US$300,000, of which he owned all but a few shares.

Peter Skene Ogden, who worked for a time for the American Fur Company, moved to Quebec after being appointed judge of the Admiralty Court in 1788. Ogden wanted to be among the first white men to see the great wilderness. After living in Quebec for six years with his wife and children, he was sent by North West Company into the interior of North America to clerk at the company’s post in what is today Saskatchewan Province. Ogden wintered on the prairies for the first time in September 1810, where he met Samuel Black, a Scotsman and also a clerk, who would become a lifelong friend. The two men made a sport of harassing Hudson’s Bay men. Among the tales cited by Gloria Cline, author of Peter Skene Odgen and the Hudson’s Bay Company, was that of the harassment of Peter Fidler of Hudson’s Bay Company. Fidler departed in 3 boats with 16 men for Churchill Factory on Hudson Bay, an important post, and Ogden, with two canoes-full of Canadians, taunted the British traders for six days by keeping just ahead of them in order “to get everything from Indians that may be on the road, as they can go much faster than us,” according to Fidler. Ogden was a much valued employee of North West and was promoted as a result of his antics with Black.

Along with Ogden, the North West company entrusted its goal of westward expansion to David Thompson. In 1807 Thompson had crossed the Rockies and reached the headwaters of the Columbia. In 1809 he again crossed the Rockies and established an outpost in what is now northern Idaho; from there he proceeded into Montana. Directly ahead of Thompson’s trading party was the first far-western expedition of John Jacob Astor’s Pacific Fur Company, the west coast subsidiary of American Fur Company. Although a U.S. company, it was managed by three Canadians, former Nor’westers—employees of North West. The War of 1812 altered hopes for Astor’s company, and the following year Pacific Fur Company sold all of its interests in the region to North West Company.

During the fall of 1818, Ogden took charge of David Thompson’s old post, near what is now Spokane, Washington. The following year, Ogden returned east. In 1821 the two companies merged under the name of the Hudson’s Bay Company after the Nor’westers learned that their company was in poor financial condition. Ogden was excluded from the merger by the company because he had fought so fiercely, although he continued for the new firm as an explorer and trapper.

The next phase of the company’s growth was shaped by the 1849 gold fever that caused a great rush westward; almost 40,000 ’49ers came west that year. The Bay Company suffered as a result. Demand made the cost of basic goods skyrocket. Lumber rose from $16 to $65 per thousand feet; unskilled labor received $5 to $10 a day; sailors were paid $150 a month. The steady flow of gold, however, created a favorable balance of trade. With settlement, though, came new tax laws. In 1850, the Treasury Department prohibited trade between Fort Victoria and the English Vancouver Island and Fort Nis-qually on the U.S. Puget Sound. This hurt Hudson’s Bay Company considerably because it legally tied up all vessels for custom inspection, which took them 350 miles off course, subjected them to twice crossing the hazardous Columbia sandbar, and made them pay heavy piloting fees at the custom house port. To add to Ogden’s troubles in the western outposts of the company, the gold fever created labor difficulties, with many crewmen deserting to seek the possibility of finding gold. After several years of health problems, Ogden returned east for 18 months. Upon returning to his post in the western provinces, the strenuous trip and his advancing age took their toll; Ogden died in 1854.

Equal in importance to the growth of the company was Sir George Simpson, who served as administrator of the company for 40 years following the merger with North West. John McLoughlin, called the Father of Oregon, governed the district under Simpson with wide powers. Sir James Douglas assisted McLoughlin; he later became Governor of the Crown Colonies of Vancouver and British Columbia.

When the westward settlement reached St. Paul, the British government tried to break the Bay Company monopoly by charging it with poor administration. A select committee of the House of the Commons investigated the charges, and with Sir George Simpson as one of the principal witnesses, the charges were dismissed. The company’s territory and the North West territories became part of the Canadian Confederation through the British North America Act of 1867. The government of Canada transferred to itself the company’s chartered territory, Rupertsland, in 1870, in return for farm lands in the prairie provinces, which were sold to settlers over the following 85 years.

Demand for general merchandise increased, and shops were established on the outskirts of the forts. In 1912 a major remodeling and reconstruction of retail trade shops was interrupted by World War I. Following the war, the company diversified, incorporating elements of oil exploration in Alberta, revitalizing its Fur Trade Department, and venturing into the oil business as a favored partner of Hudson’s Bay Oil and Gas. After the 1929 stock market crash and Great Depression, the fur department revitalized itself, improving working conditions, and in some areas acted as an agent for Inuit Indian carvings.

Early in the 20th century, the company made retail stores its first priority, building downtown department stores in each of the major cities of western Canada, moving east through acquisitions, and expanding into the suburbs of major Canadian cities beginning in the 1960s. Hudson’s Bay Company acquired Mark borough Properties, a real estate company, in 1973; Zellers, a chain of discount stores, in 1978; and Simpsons, a group of Toronto-area department stores, the following year. Kenneth Thomson, representing the family of the late Lord Thomson of Fleet, acquired a 75% controlling interest in the company in 1979.

In the 1970s, the company’s governor was Donald McGiverin, and George Kosich was chief operating officer. In that decade and into the 1980s, sales and oil prices slipped, while debt from acquisitions piled up. By 1985 the company owed C$2.5 billion and with feeble operating profits wiped out by C$250 million in interest payments, the company suffered its fourth consecutive yearly loss. In response, management shed assets, including the Bay’s 179 northernmost stores, some of which could be traced back to the fur-trading days of Ogden. In a strong attempt to survive, Thomson shook up top management, eventually appointing George Kosich, a career merchandiser, president. Thomson revamped retail operations. The combined market share of the three department store chains rose to 33% from 29% in two years.

Kosich refocused Simpsons to the upscale market and the Bay toward the middle-to-lower-priced market. In repositioning the Bay, Kosich put the 300-year-old Canadian giant up against its closest U.S. counterpart, Sears. In 1985 the Bay had 10% of the market, Sears 27%. Employing an intensive advertising campaign—C$75 million—the Bay produced a bold and aggressive image before Canadians. In the first half of 1986, sales rose 13.2% over that of 1985. Operating profit rose to C$31 million in 1985, and to C$83 million on C$1.8 billion in total sales in 1986. Sears was feeling the results, reporting barely a 3% rise in 1986 and a continuous downturn ever since. Zellers was positioned to appeal to the budget shopper as a “junior” department store. Club Z, a frequent-buyer program that allowed customers to accumulate points for prizes, boasts three million members. Hudson’s Bay Company reversed a formidable debt picture in 1987 by shedding non-strategic assets such as its wholesale division and getting out of the oil and gas business. In 1990 it spun off its real estate subsidiary, Mark borough Properties, as a separate, public company. Shareholders received one share of Mark borough for each share they held of Hudson’s Bay, with the Thomson family retaining a majority interest in Mark borough. Also in 1990, the company bought 51 Towers Department Stores and merged them with Zellers.

In January 1991 Hudson’s Bay Company permanently left the Canadian fur trade, an estimated C$350 million market, because its own share of that had degenerated to a paltry C$7 million in 1990. The company had been targeted by increasingly vocal antifur groups. Early in 1991, the company sold three million new common shares, with net proceeds of $72.5 million. It also repurchased slightly more than two million Series A preferred shares for $42.5 million. Company officials said these transactions would result in a stronger financial position. Because of declines in interest rates in the early 1990s, the Series A shares, with an 8% dividend, had become more expensive to service than debt. Later in 1991 the company broke up its Simpsons division, when it sold eight Simpsons stores to Sears Canada Inc., and moved the remaining 6 stores into the Bay division.

The company entered the 1990s expecting a recession to adversely affect retail sales. Hudson’s Bay continued, however, to expect growth in earnings. The company planned to divest itself of under-performing stores, expand stores in promising locations, and increase overall productivity and flexibility.

Further Reading

Rich, Edwin Ernest, ed., Minutes of the Hudson’s Bay Company, 1671-1674, London, Ontario, Hudson’s Bay Record Society Publications, 1942; Innis, Harold, The Fur Trade in Canada, Toronto, University of Toronto Press, 1967; Cline, Gloria G., Peter Skene Odgen and the Hudson’s Bay Company, Norman, Oklahoma, University of Oklahoma Press, 1974; Ray, Auther J., and Donald B. Freeman, Give Us Good Measure: An Economic Analysis of Relations between the Indians and the Hudson’s Bay Company before 1763, Toronto, University of Toronto Press, 1978; Newman, Peter C, “The Hudson’s Bay Company: Canada’s Fur-Trading Empire,” National Geographic, August 1987.

—Claire Badaracco

Hudson's Bay Company

401 Bay Street, Suite 500
Toronto, Ontario M5H 2Y4
Canada
Telephone: (416) 861-6112
Fax: (416) 861-4720
Web site: http://www.hbc.com

Private Company
Incorporated: 1670 as the Governor and Company of Adventurers of England trading into Hudson's Bay
Employees: 39,256
Sales: CAD 6.95 billion ($6.08 billion) (2006)
NAIC: 452111 Department Stores (Except DiscountDepartment Stores); 452112 Discount Department Stores; 442290 Other Home Furnishings Stores; 454111 Electronic Shopping

Canada's number one department store retailer, Hudson's Bay Company is also Canada's oldest corporation and one of the oldest in the world. On May 2, 1670, King Charles II granted 18 investors a charter incorporating them as the Governor and Company of Adventurers of England trading into Hudson's Bay. In its first century the company traded with the North American Indians, established forts on Hudson Bay, and successfully fought with U.S. and Canadian competitors to build its fur trade. By the early 2000s, in a coast-to-coast operation accounting for approximately 5 percent of Canadian retail sales (excluding food and automobiles) and about 28 percent of department store sales, the company owned and managed about 570 stores in five main retail formats: the Bay full-line fashion department stores, about 100 strong and averaging 135,000 square feet in size; Zellers, Canada's number two discount department store (trailing Wal-Mart Canada Corp.), with more than 280 units averaging 95,000 square feet; Fields, a chain in western Canada of more than 120 small general-merchandise and clothing stores; and two specialty stores, Home Outfitters kitchen, bed, and bath superstores and Designer Depot off-price stores specializing in clothing and home decor. Founded in 1670, Hudson's Bay was acquired and taken private in March 2006 by Maple Leaf Heritage Investments Acquisition Corporation, a takeover vehicle controlled by Jerry Zucker, a billionaire from South Carolina.

THE EARLY YEARS

The development of the company was tied to the growth of Canada and settlement of its western region. Those who were important to the development of the company also were important politically and historically to the economic and political growth of the New World. The list of well-known people associated with the company is long and includes Peter Skene Ogden, Solomon Juneau, Henry Kelsey, James Knight, Samuel Hearne, Peter Pond, Alexander Mackenzie, Sir George Simpson, Sir James Douglas, and John McLoughlin. The chartering of the company on May 2, 1670, with Prince Rupert (a cousin of Charles II) as the company's first governor, followed the successful 1668 fur-trading voyage of the ketch Nonsuch that brought back beaver pelts for the English market, used by felters and hatters to make the beaver hats that were fashionable at the time.

The Adventurers' charter of 1670 gave it 1.49 million square miles of virgin territory, or nearly 40 percent of today's Canadian provinces, including what would become Ontario, Quebec, north of the Laurentian watershed and west of the Labrador boundary, Manitoba, the better part of Saskatchewan, southern Alberta, and much of the Northwest Territories. The group's rights to the lucrative fur trade did not go uncontested, and it was not until 20 years later that the company made its first inland expedition. Henry Kelsey, an apprentice who joined the company in 1677 and who later became a company governor, made the first journey into the prairie in 1690, learning the Cree language and adapting to Indian life. He wished to encourage peace among the Indian tribes so that they could bring beaver pelts to the forts without being attacked. Three forts on James Bay—Rupert's House, Moose, and Albany in the east—and a fourth, York Factory, on the west coast of Hudson Bay were the sites of battles for nearly 30 years between the French and English contesting the territory and the right to conduct trade. The Treaty of Ryswick in 1697 brought peace, but by then the company was near ruin. Most of the company's first century of business was devoted to establishing forts and territorial rights and making peace with the Indians and the French merchants who wanted to be a part of the fur trade in the New World.

COMPETITION WITH NORTH
WEST COMPANY

One of the Hudson's Bay Company's fiercest early competitors was North West Company, established in 1779 by a Scottish-Canadian group of nine traders that moved into the Canadian interior around 1780 and claimed to be the rightful successors to the early French traders who had opened up the land. North West Company had two types of shareholders: the eastern partners, merchants in Montreal and Quebec who supplied the venture capital, and the "wintering" partners, who became responsible for exploratory and sales operations. By 1800 North West became a serious competitor, forcing Hudson's Bay Company to become increasingly more adventurous, pushing the trade boundaries westward from Hudson Bay, in fear of losing trade with the western Indians. Each company drove the other toward new expeditions and soon each had men trading on the upper Missouri River.

North West's Alexander Mackenzie, who later was knighted, was the most famous fur trader of his day. Mackenzie pushed the trade boundaries farther westward. Several of his trade expeditions were historical achievements: in 1789 he covered 1,600 miles and back in 102 days, and in 1793 he crossed the Rocky Mountains to reach the Pacific Ocean.

Other companies also envied the apparent monopoly of Hudson's Bay Company. U.S. traders wanted a share in the fur trade following the Lewis and Clark expedition of 1804 to 1806. In 1808 Pierre Chouteau, William Clark, and five others established the Missouri Fur Company, and in New York John Jacob Astor, the leading fur dealer in the United States, started the American Fur Company, capitalized at $300,000, of which he owned all but a few shares.

Peter Skene Ogden, who worked for a time for the American Fur Company, moved to Quebec after being appointed judge of the Admiralty Court in 1788. Ogden wanted to be among the first white men to see the great wilderness. After living in Quebec for six years with his wife and children, he was sent by North West Company into the interior of North America to clerk at the company's post in what is today Saskatchewan Province. Ogden wintered on the prairies for the first time in September 1810, where he met Samuel Black, a Scotsman and also a clerk, who would become a lifelong friend. The two men made a sport of harassing Hudson's Bay men. Among the tales cited by Gloria G. Cline, author of Peter Skene Ogden and the Hudson's Bay Company, was that of the harassment of Peter Fidler of Hudson's Bay Company. Fidler departed in three boats with 16 men for Churchill Factory on Hudson Bay, an important post, and Ogden, with two canoes full of Canadians, taunted the British traders for six days by keeping just ahead of them "to get everything from Indians that may be on the road, as they can go much faster than us," according to Fidler. Ogden was a much valued employee of North West and was promoted as a result of his antics with Black.

COMPANY PERSPECTIVES

Hudson's Bay Company is a seamless retail organization built to best serve the needs of the majority of Canadian consumers through several highly focused formats, linked by customer bridges and enabled by common and integrated support services.

Along with Ogden, the North West Company entrusted its goal of westward expansion to David Thompson. In 1807 Thompson had crossed the Rockies and reached the headwaters of the Columbia. In 1809 he again crossed the Rockies and established an outpost in what is now northern Idaho; from there he proceeded into Montana. Directly ahead of Thompson's trading party was the first far-western expedition of John Jacob Astor's Pacific Fur Company, the west coast subsidiary of American Fur Company. Although a U.S. company, it was managed by three Canadians, former Nor'westers, employees of North West. The War of 1812 altered hopes for Astor's company, and the following year Pacific Fur Company sold all of its interests in the region to North West Company.

During the fall of 1818, Ogden took charge of David Thompson's old post, near what is now Spokane, Washington. The following year Ogden returned east. In 1821 the two companies merged under the name of the Hudson's Bay Company after the Nor'westers learned that their company was in poor financial condition. Ogden was excluded from the merger by the company because he had fought so fiercely, although he continued for the new firm as an explorer and trapper.

KEY DATES

1670:

King Charles II grants 18 investors a charter incorporating them as the Governor and Company of Adventurers of England trading into Hudson's Bay.

1779:

North West Company is founded.

1821:

Hudson's Bay Company and North West merge under the former's name.

1845:

Henry Morgan & Co. is founded in Montreal.

1869:

Hudson's Bay Company returns Rupert's Land to the Crown, which then transfers it to the newly formed Dominion of Canada.

1913:

Company opens its first modern department stores in Calgary and Edmonton.

1931:

Walter P. Zeller establishes the Zellers chain.

1960:

Hudson's Bay Company acquires Henry Morgan & Co., thereby expanding into eastern Canada.

1964:

The Bay banner is introduced for all of the company's department stores outside Quebec.

1970:

Queen Elizabeth II grants the company a new charter; Hudson's Bay Company formally becomes a Canadian company; its headquarters are shifted from London to Winnipeg.

1972:

Morgan's stores in Quebec are converted to the Bay banner.

1978:

Hudson's Bay Company acquires the Zellers and Fields chains.

1979:

Kenneth R. Thomson gains a controlling 75 percent stake in the company.

1987:

Head office is moved to Toronto; company divests its Northern Stores Division and its fur auction houses, thus severing the last ties to its fur trading roots.

1990:

The Towers chain is acquired and merged into Zellers.

1992:

Thomson reduces his interest in the company to 25 percent through a secondary stock offering.

1993:

Hudson's Bay Company buys 25 former Woodward's locations in British Columbia and Alberta.

1994:

Wal-Mart Stores, Inc. enters the Canadian market, quickly becoming fierce Zellers competitor.>

1997:

Thomson's stake is reduced to zero through another secondary offering.

1998:

Kmart Canada Co. is acquired, with most of its outlets converted to the Zellers banner; Hudson's Bay Company launches specialty store Bed, Bath and More, later rechristened Home Outfitters.

2004:

Designer Depot off-price specialty store makes its debut.

2006:

South Carolina billionaire Jerry Zucker acquires Hudson's Bay Company for CAD 1.13 billion, taking it private.

GOLD RUSH DIFFICULTIES

The next phase of the company's growth was shaped by the 1849 gold fever that caused a great rush westward; almost 40,000 '49ers came west that year. Hudson's Bay Company suffered as a result. Demand made the cost of basic goods skyrocket. Lumber rose from $16 to $65 per thousand feet; unskilled labor received $5 to $10 a day; sailors were paid $150 a month. The steady flow of gold, however, created a favorable balance of trade. With settlement, though, came new tax laws. In 1850 the Treasury Department prohibited trade between Fort Victoria and the English Vancouver Island and Fort Nisqually on the U.S. Puget Sound. This hurt Hudson's Bay Company considerably because it legally tied up all vessels for custom inspection, which took them 350 miles off course, subjected them to twice crossing the hazardous Columbia sandbar, and made them pay heavy piloting fees at the customhouse port. To add to Ogden's troubles in the western outposts of the company, the gold fever created labor difficulties, with many crewmen deserting to seek the possibility of finding gold. After several years of health problems, Ogden returned east for 18 months. Upon reclaiming his post in the western provinces, the strenuous trip and his advancing age took their toll; Ogden died in 1854.

Equal in importance to the growth of the company was Sir George Simpson, who served as administrator of the company for 40 years following the merger with North West. John McLoughlin, called the Father of Oregon, governed the district under Simpson with wide powers. Sir James Douglas assisted McLoughlin; he later became governor of the Crown Colonies of Vancouver and British Columbia.

When the westward settlement reached St. Paul, the British government tried to break the Hudson's Bay Company monopoly by charging it with poor administration. A select committee of the House of the Commons investigated the charges, and with Sir George Simpson as one of the principal witnesses, the charges were dismissed. The company's territory and the Northwest Territories became part of the Canadian Confederation through the British North America Act of 1867. The government of Canada transferred to itself the company's chartered territory, Rupert's Land, in 1869, in return for farmlands in the prairie provinces, which were sold to settlers over the following 85 years.

EARLY 20TH-CENTURY
DIVERSIFICATION, INCLUDING
RETAIL

The company began selling goods to the average Canadian in 1881, when it published its first mail-order catalog. Demand for general merchandise increased, and shops were established on the outskirts of the forts. In 1907 Hudson's Bay Company created its wholesale department to sell liquor, tobacco, coffee, tea, confectionery products, and blankets. Two years later, the company reorganized itself into three divisions: retail, fur trade, and land. Following World War I, the company diversified, venturing into the oil business as a favored partner of Hudson's Bay Oil and Gas. After the 1929 stock market crash and Great Depression, the fur department revitalized itself, improving working conditions, and in some areas acted as an agent for Inuit Indian carvings.

Retail stores were a top priority from early in the 20th century. In 1913 Hudson's Bay Company opened the first two of a planned six modern department stores, in the downtowns of Calgary and Edmonton. The remaining four followed over the course of several years, with the rollout interrupted by World War I: Vancouver in 1914, Victoria in 1921, Saskatoon in 1922, and Winnipeg in 1926. These were the "original six" Hudson's Bay Company stores, serving the major cities of western Canada.

Over the ensuing decades, Hudson's Bay Company expanded its retail operations, while winding down the land department in the 1940s. Expansion into the suburbs of the major Canadian cities in which it operated began in the 1960s. In a key move into eastern Canada, Hudson's Bay Company acquired Henry Morgan & Co. Ltd. in 1960. This firm, initially known as Smith & Morgan, had been a fixture in Montreal since 1845. It had operated a large department in downtown Montreal since the late 19th century. After opening its first branch in 1950, the company expanded to Toronto and Ottawa in 1951 and Hamilton in 1957. By the time of its acquisition by Hudson's Bay Company, there were ten Morgan's department stores in Quebec and Ontario. The Ontario stores were soon rebranded under the Hudson's Bay name, but then in 1964 the company converted all its retail stores outside Quebec to a new banner, "The Bay." The Morgan's stores were finally converted to the Bay brand in June 1972.

In 1970, in the company's 300th year in existence, Queen Elizabeth II granted Hudson's Bay Company a new charter that revoked most of the provisions of the original charter. The firm was also formally changed from a British to a Canadian company, and its headquarters were moved from London to Winnipeg. The head office was moved again in 1987, to Toronto.

A string of acquisitions in the 1970s significantly broadened the company's operations, particularly in retail. In 1973 Markborough Properties Inc., a real estate development company, was acquired. In 1978 Hudson's Bay Company purchased Zellers Inc., operator of the Zellers chain of discount department stores. The company had been founded in 1931 by Walter P. Zeller. Zellers also brought to Hudson's Bay Company the Fields clothing chain, which had been founded by Joseph Segal in the 1950s, and Marshall Wells Limited, a chain of more than 150 franchised hardware stores. Also acquired by Hudson's Bay Company in 1978 was Simpsons, a group of Toronto-area department stores. This company traced its roots back to the 1872 founding of a dry goods business in Toronto by Robert Simpson.

In 1979 Hudson's Bay Company became the object of a takeover battle between Kenneth R. Thomson, representing the family of the late Lord Thomson of Fleet, and George Weston Limited, a major Canadian food processor and distributor. Thomson eventually prevailed, acquiring a 75 percent controlling interest in the company through a CAD 400 million deal.

RESTRUCTURING

In the 1970s and into the 1980s, sales and oil prices slipped, while debt from acquisitions piled up. By 1985 the company owed CAD 2.5 billion and with feeble operating profits wiped out by CAD 250 million in interest payments, the company suffered its fourth consecutive yearly loss. Having sold Hudson's Bay Oil and Gas to Dome Petroleum, Ltd. in 1982, management responded with further asset sales. In 1985 Marshall Wells was sold, followed two years later by the divestment of the company's Northern Stores Division, which consisted of its 179 northernmost stores, some of which could be traced back to the fur trading days of Ogden. (In its independent guise, this division later reorganized itself and took on the historic North West Company name.) Hudson's Bay Company also divested its fur auction houses in 1987, thus cutting its last tie to its fur trading roots. In a strong attempt to survive, Thomson shook up top management, eventually appointing George Kosich, a career merchandiser, president. Thomson revamped retail operations. The combined market share of the three department store chains rose to 33 percent from 29 percent in two years.

Kosich refocused Simpsons to the upscale market and the Bay toward the middle- to lower-priced market. In repositioning the Bay, Kosich put the 300-year-old Canadian giant up against its closest U.S. counterpart, Sears. In 1985 the Bay had 10 percent of the market and Sears had 27 percent. Employing an intensive CAD 75 million advertising campaign, the Bay produced a bold and aggressive image for Canadians. In the first half of 1986, sales rose 13.2 percent over that of 1985. Operating profit rose to CAD 31 million in 1985 and to CAD 83 million on CAD 1.8 billion in total sales in 1986. Sears was feeling the results, reporting a barely 3 percent rise in 1986 and a downturn for the following several years. Zellers was positioned to appeal to the budget shopper as a "junior" department store. Club Z, a frequent-buyer program that allowed customers to accumulate points for prizes, boasted three million members. In 1990 Hudson's Bay Company spun off its real estate subsidiary, Markborough Properties, as a separate public company. Shareholders received one share of Markborough for each share they held of Hudson's Bay, with the Thomson family retaining a majority interest in Markborough. Also in 1990, the company bought 51 Towers department stores and merged them with Zellers.

In January 1991 Hudson's Bay Company temporarily left the Canadian fur trade, an estimated CAD 350 million market, when it stopped selling fur coats at the Bay stores; the Bay's share of the fur trade had degenerated to a paltry CAD 7 million by 1990. The company also had been targeted by increasingly vocal antifur groups. In 1997, however, the Bay reopened its fur salons. Early in 1991 the company sold three million new common shares, with net proceeds of CAD 72.5 million. It also repurchased slightly more than two million Series A preferred shares for CAD 42.5 million. Company officials said these transactions would result in a stronger financial position. Because of declines in interest rates in the early 1990s, the Series A shares, with an 8 percent dividend, had become more expensive to service than debt. Later in 1991 the company eliminated its Simpsons division, when it sold eight Simpsons stores to Sears Canada Inc. and converted the remaining six stores into the Bay units. Late 1991 also saw the Bay announce a three-year plan to double its purchasing of U.S. brands, a program that aimed at decreasing the number of Canadians seeking bargains in U.S. stores (because of a strong Canadian dollar) and that developed from the passage of the U.S.-Canada free-trade agreement in 1989.

WAL-MART CHALLENGE

In 1992 Thomson reduced his interest in Hudson's Bay Company to 25 percent through a secondary stock offering; five years later this stake was reduced further through another secondary offering to zero. Meantime, in 1993, Hudson's Bay Company acquired Linmark Westman International Limited, a buying firm in the Far East, and also purchased 25 former Woodward's locations in British Columbia and Alberta, converting most of the sites to the Bay and Zellers formats. Woodward's, which had filed for bankruptcy and shut down its stores in 1992, was another venerable Canadian retail institution, able to trace its roots back to 1892, when Charles Woodward opened his first retail store in Vancouver.

On the heels of strong 1993 results of CAD 5.44 billion ($3.9 billion) and net earnings of CAD 148 million ($108 million), Hudson's Bay Company was caught somewhat off-guard when U.S. discounting giant Wal-Mart Stores, Inc. entered the Canadian market for the first time in early 1994 through the purchase of 122 stores from Woolworth Corporation's Canadian subsidiary. A price war quickly developed between the new Wal-Mart stores in Canada and the Zellers chain. In a little more than three years, Wal-Mart gained 45 percent of the discount market in Canada, surpassing Zellers, whose market share fell from more than 50 percent to 41 percent. Worse yet, the price war had cut severely into Zellers's and, consequently, Hudson's Bay Company's profits. Net earnings at Zellers fell from a peak of CAD 256 million in 1993 to CAD 73 million in 1997, while overall net earnings (after interest and taxes) for the company fell to just CAD 54 million in 1997. Compounding the company's difficulties were reduced earnings at the Bay, which reflected a general downturn in the department store sector.

In responding to the Wal-Mart challenge, the company began to increase the size of its Zellers units, which had averaged 75,000 square feet in comparison with the 120,000-square-foot Wal-Marts. New Zellers that were built ranged from 90,000 to 125,000 square feet. The company also began to renovate older units. In mid-1997 Hudson's Bay Company hired a new president and CEO, William R. Fields, who had served as chairman of Blockbuster Video but was, more importantly, a 25-year veteran of Wal-Mart. (Kosich initially retired but within days was hired by T. Eaton Company Ltd., a chief rival of Hudson's Bay Company, as president of the Eaton's department store chain. The hiring resulted in Hudson's Bay Company suing Eaton's for stealing other company executives and accusing Kosich of breach of fiduciary duty for joining Eaton's while still employed by Hudson's Bay Company. The suit was settled quickly without terms being disclosed.)

Under Fields's leadership Hudson's Bay Company became much more aggressive in its pursuit of a turnaround. The most dramatic early example of this came in February 1998 when the company bought Kmart Canada Co. for CAD 240 million ($167.7 million). The deal eliminated the number three discount retailer from the Canadian market and, in addition, leapfrogged Zellers back ahead of Wal-Mart. Over the next several months, Hudson's Bay Company closed 40 of the 112 Kmart stores it had gained and converted 59 of the units to Zellers stores. Two Kmart stores and one Zellers were changed into Bay units, and 11 Kmart stores and one Zellers were selected to be converted into new specialty retail formats. This new specialty initiative was launched in June 1998 when the first Bed, Bath and More store opened in Newmarket, Ontario; the new chain was the first Canadian-based home category killer. In 1999 the chain was renamed Home Outfitters.

Yet another development in the first few months of the Fields regime was the beginning of the conversion of the Fields chain into small general merchandise discount stores for the mass market, modeled somewhat after the U.S.-based Family Dollar chain. CEO Fields also launched efforts to improve the traditionally poor customer service at the Zellers chain and to make technology upgrades at both Zellers and the Bay aimed at improving inventory control. As well, an effort began to reposition the Zellers chain as an upscale discount retailer, or, in essence, the Canadian version of Dayton-Hudson Corporation's Target chain, which survived its own onslaught from Wal-Mart by going upscale. Zellers' upmarket move included the introduction of new apparel lines, such as the Martha Stewart Every Day collection. Finally, Fields made significant changes to the company's management team. In a move to pare non-core operations, the Linmark Westman subsidiary was divested in mid-1998.

Despite this whirlwind of activity, Hudson's Bay Company's struggles continued. Zellers showed some improvement, but the troubled Bay department stores remained a drag on the company. Increased competition from specialty stores and discounters coupled with relentless price cutting by major competitor Eaton's, a retailer in its death throes, resulted in disappointing results at the Bay. In March 1999 Fields resigned suddenly and was succeeded by George J. Heller, who had headed Zellers for the previous year and had previously been president of Kmart Canada. Later in 1999 Eaton's went under. While this eliminated one competitor, and made the Bay the last of the big Canadian department stores still in business, it also strengthened another rival, Sears Canada, which moved quickly to buy 19 former Eaton's stores.

FALLING INTO AMERICAN
HANDS

Heller's initial moves focused on revitalizing the Bay by moving the department store upmarket, installing new floor layouts, tailoring the merchandise mix at each store based on its community of location, offering more exclusive product lines, and giving salespeople more training. The new leader also cut back on the number of sales events. Other initiatives included the launching of an e-commerce web site, hbc.com, in 2000 and the further expansion of the Home Outfitters specialty chain. By late 2002 there were 39 Home Outfitters outlets, making it the fastest-growing niche retailer in the country. Another eight locations were opened in 2003.

Heller failed to effect a turnaround as company revenues fell in the early 2000s and profits were stagnant. By 2003 Heller was moving to shore up the finances of Hudson's Bay Company to keep it from suffering the same fate as Eaton's. He moved aggressively to reduce debt and cut costs by consolidating the warehousing and other buying operations that had been conducted separately by the Bay and Zellers. The company also began encouraging customers to cross-shop its chains by moving to a single Hudson's Bay Company loyalty program and credit card.

The company's ongoing travails pummeled its stock price. Hudson's Bay Company shares, which had traded for as much as CAD 38 a share in the fall of 1997, fell to around CAD 6 by the fall of 2003. Corporate raiders began circling the company, and there were rumors of a possible acquisition by Target Corporation (the renamed Dayton-Hudson). Behind the scenes, a U.S. takeover artist and financier from South Carolina, billionaire Jerry Zucker, began accumulating shares in Hudson's Bay Company in 2003. By mid-2005 Zucker (rhyming with "cooker") had amassed just under a 20 percent stake in the company, slightly below the limit requiring him to make an offer for all the firm's shares. In the meantime, Hudson's Bay Company in November 2004 launched a new retail concept called Designer Depot, which was positioned as an off-price retail outlet. The first, a 37,400-square-foot store, was located in Vaughan Mills, a mall located about 20 miles north of downtown Toronto.

In October 2005, shortly after Hudson's Bay Company announced a plan to sell its credit card division, Zucker made his move, launching a CAD 1.1 billion hostile bid for the venerable Canadian retailer. The board of directors rejected the offer and put the company up for auction. While two other groups put in bids, Zucker won the day by bumping his first offer from CAD 14.75 per share to CAD 15.25 per share, which amounted to only an additional CAD 28 million. The board accepted this offer in January 2006. One month later, Hudson's Bay Company reached an agreement to sell its credit card division to GE Money, the Canadian consumer lending unit of General Electric Company. In March 2006 Zucker completed his takeover of Hudson's Bay Company, taking it private through Maple Leaf Heritage Investments Acquisition Corporation. He installed himself as CEO and governor; Heller stepped down from his executive positions, but retained a seat on a reconstituted board of directors. In April the sale of the credit card division was completed, with Hudson's Bay Company receiving net proceeds of CAD 355 million.

In the months following the U.S. takeover of the company, speculation was rife in the Canadian press that Zucker intended to quickly close down or sell more than 80 of the company's stores. The new owner, however, had made a legal commitment to Investment Canada (a federal agency charged with approving foreign acquisitions) limiting the number of stores it could close. It appeared likely that Zucker would continue Heller's approach of closing about ten underperforming stores per year and renovating another 45. Some of the weaker Zellers outlets were likely to become Home Outfitters or Designer Depots. Longer term, it still seemed conceivable, according to some analysts, that Zellers would be sold to Target, a chain not just surviving but thriving in Wal-Mart's huge shadow. In the meantime, Zucker had plans to transform Fields into a national dollar-store-like chain. As for the Bay, Zucker's vision was to make the department store much more distinctive, a sort of Canadian version of Macy's, more upscale, with exclusive, edgier fashions, less discounting, and much more attentive customer service. For Hudson's Bay Company, a new era of trailblazing, led by an American no less, had begun.

Claire Badaracco

Updated, David E. Salamie

PRINCIPAL SUBSIDIARIES

Zellers Inc.

PRINCIPAL DIVISIONS

The Bay; Specialty Stores.

PRINCIPAL COMPETITORS

Wal-Mart Canada Corp.; Sears Canada Inc.; Canadian Tire Corporation Limited; Costco Wholesale Canada Ltd.

FURTHER READING

Allaby, Ian, "The Bay Boys Battle Back," Canadian Business, May 1987, pp. 56 +.

Austen, Ian, "Reinventing a 335-Year Tradition," New York Times, June 14, 2005, p. C6.

Burns, John F., "Fur Industry Shrinking with No End in Sight," New York Times, February 26, 1991, p. D1.

Chidley, Joe, and Sean Silcoff, "The Job from Hell," Canadian Business, May 28, 1999, pp. 38–40, 42–43, 45.

Cline, Gloria G., Peter Skene Ogden and the Hudson's Bay Company, Norman: University of Oklahoma Press, 1974, 279 p.

Collier, James Lincoln, "With a Whole Skin: Hudson's Bay Co. Is Still Flourishing After Three Hundred Years," Barron's, November 17, 1969, pp. 9 +.

Fox, Jim, "Fields Getting Hudson's Bay Ready for Battle," Discount Store News, June 23, 1997, pp. 3 +.

Gough, Barry, "Lords of the Northern Forest," History Today, September 1991, pp. 49 +.

Greenberg, Larry M., "Besieged Hudson's Bay Co. Starts to Blaze New Trails," Wall Street Journal, February 13, 1998, pp. B1, B2.

——, "Hudson's Bay Faces Challenge from Southern Rival," Wall Street Journal, May 24, 1996, p. B4.

——, "Hudson's Bay to Buy Kmart Stores in Canada to Strengthen Position," Wall Street Journal, February 9, 1998, p. B2.

Heinzl, Mark, and Larry M. Greenberg, "The Trail Turns Cold for Hudson's Bay Turnaround," Wall Street Journal, March 9, 1999, p. B4.

"Hudson's Bay in the Hot Seat," MMR, July 18, 2005, pp. 13, 16.

Innis, Harold A., The Fur Trade in Canada, Toronto: University of Toronto Press, 1962, 446 p.

Matthews, Jan, and Greg Boyd, "The March of a Retail Martinet," Canadian Business, December 1990, pp. 32 +.

Newman, Peter C., "The Beaver and the Bay," Canadian Geographic, August/September 1989, pp. 56 +.

——, Company of Adventurers, 3 vols., Markham, Ontario, and New York: Viking, 1985–1991.

——, Empire of the Bay: An Illustrated History of the Hudson's Bay Company, edited by John Geiger, Markham, Ontario, and New York: Viking, 1989.

——, "A Soft Target," Maclean's, November 7, 2005, pp. 21 +.

Newman, Peter C., and Kevin Fleming, "Three Centuries of the Hudson's Bay Company: Canada's Fur-Trading Empire," National Geographic, August 1987, pp. 192 +.

Olijnyk, Zena, "The Bay in Play," Canadian Business, November 7, 2005, pp. 72 +.

——, "Baywatch," Canadian Business, June 10, 2002, pp. 90 +.

——, "Does He Know Something We Don't?" Canadian Business, Summer 2005 (spec. issue), pp. 148 +.

Ray, Auther J., and Donald B. Freeman, "Give Us Good Measure": An Economic Analysis of Relations Between the Indians and the Hudson's Bay Company Before 1763, Toronto: University of Toronto Press, 1978, 298 p.

Rich, Edwin Ernest, Hudson's Bay Company, 1670–1870, 3 vols., Toronto: McClelland and Stewart, 1960.

Rich, Edwin Ernest, ed., Minutes of the Hudson's Bay Company, 1671–1674, London, Ontario: Hudson's Bay Record Society Publications, 1942.

Scally, Robert, "Hudson's Bay to Buy Kmart Canada, Retool Zellers, and Unveil New Chains," Discount Store News, February 23, 1998, pp. 1, 40.

Seckler, Valerie, "Fields's Playbook for Zellers," WWD, September 10, 1997, p. 22.

Strauss, Marina, "Zucker in Hostile $1.1-Billion Bid for HBC," Globe and Mail, October 29, 2005, p. B3.

——, "Zucker Installs New HBC Top Brass," Globe and Mail, March 10, 2006, p. B1.

——, "Zucker's HBC Vision Starting to Emerge," Globe and Mail, August 1, 2006, p. B3.

Strauss, Marina, and Sinclair Stewart, "HBC Sells Credit Card Division," Globe and Mail, February 8, 2006, p. B1.

Strauss, Marina, Sinclair Stewart, and Jacquie McNish, "Zucker Closes Deal on HBC with Sweeter Takeover Offer," Globe and Mail, January 27, 2006, p. B1.

Terry, Edith, "Hudson's Bay Is Paying for Its Mistakes," Business Week, March 11, 1985, pp. 49 +.

"Tough Times at the Bay: What Good Is Growth Without Profit?" Canadian Business, April 1982, p. 20.

Walmsley, Ann, "Retreat from the Frontier," Maclean's, February 16, 1987, p. 26.

Hudson’s Bay Company

401 Bay Street, Suite 500
Toronto, Ontario M5H 2Y4
Canada
(416) 861-6112
Fax: (416) 861-4720
Web site: http://www.hbc.com

Public Company
Incorporated: 1670 as the Governor and Company of Adventurers of England trading into Hudson’s Bay
Employees: 61,500
Sales: C $6.45 billion (US $4.45 billion) (1997)
Stock Exchanges: Montreal Toronto
Ticker Symbol: HBC
SICs: 5311 Department Stores; 5621 Women’s Clothing Stores; 5641 Children’s & Infants’ Wear Stores

Canada’s number one department store retailer, Hudson’s Bay Company, is also Canada’s oldest corporation. On May 2, 1670, King Charles II granted 18 investors a charter incorporating them as the Governor and Company of Adventurers of England trading into Hudson’s Bay. In its first century the company traded with the North American Indians, established forts on Hudson Bay, and successfully fought with U.S. and Canadian competitors to build its fur trade. By the late 1990s, in a coast-to-coast operation accounting for nearly eight percent of Canadian retail sales (excluding food and automobiles) and about 37 percent of department store sales, the company owned and managed about 540 stores in three main retail formats: the Bay fashion department stores, about 100 strong and typically 140,000 to 180,000 square feet in size; Zellers, Canada’s leading discount department store, with more than 340 units that average 77,500 square feet; and Fields, a chain in western Canada of more than 100 small clothing stores.

The Early Years

The development of the company is tied to the growth of Canada and settlement of its western region. Those who were important to the development of the company also were important politically and historically to the economic and political growth of the New World. The list of well-known people associated with the company is long and includes Peter Skene Ogden, Solomon Juneau, Henry Kelsey, James Knight, Samuel Hearne, Peter Pond, Alexander Mackenzie, Sir George Simpson, Sir James Douglas, John McLoughlin, and others. The chartering of the company on May 2, 1670, with Prince Rupert—a cousin of Charles II—as the company’s first governor, followed the successful fur trading voyage of the ketch Nonsuch that brought back beaver pelts for the English market, used by felters and hatters to make the beaver hats that were fashionable at the time.

The Adventurers’ charter of 1670 gave it 1.49 million square miles of virgin territory, or nearly 40 percent of today’s Canadian provinces, including what would become Ontario, Quebec north of the Laurentian watershed and west of the Labrador boundary, Manitoba, the better part of Saskatchewan, southern Alberta, and much of the Northwest Territories. The group’s rights to the lucrative fur trade did not go uncontested, and it was not until 20 years later that the company made its first inland expedition. Henry Kelsey, an apprentice who joined the company in 1677 and who later became a company governor, made the first journey into the prairie in 1690, learning the Cree language and adapting to Indian life. He wished to encourage peace among the Indian tribes so that they could bring beaver pelts to the forts without being attacked. Three forts on James Bay—Rupert’s House, Moose, and Albany in the east—and a fourth, York Factory, on the west coast of Hudson Bay were the sites of battles for nearly 30 years between the French and English contesting the territory and the right to conduct trade. The Treaty of Ryswick in 1697 brought peace, but by then the company was near ruin. Most of the company’s first century of business was devoted to establishing forts and territorial rights and making peace with the Indians and the French merchants who wanted to be a part of the fur trade in the New World.

Early-18OOs: Competition with North West Company

One of the Hudson’s Bay Company’s fiercest early competitors was North West Company, established in 1779 by a Scottish-Canadian group of nine traders that moved into the Canadian interior around 1780 and claimed to be the rightful successor to the early French traders who had opened up the land. North West Company had two types of shareholders: the eastern partners, merchants in Montreal and Quebec who supplied the venture capital, and the “wintering” partners, who became responsible for exploratory and sales operations. By 1800 North West became a serious competitor, forcing Hudson’s Bay Company to become increasingly more adventurous, pushing the trade boundaries westward from the Hudson Bay, in fear of losing trade with the western Indians. Each company drove the other toward new expeditions, so that by the turn of the century, they each had men trading on the upper Missouri River.

North West’s Alexander Mackenzie, who later was knighted, was the most famous fur trader of his day. Mackenzie pushed the trade boundaries farther westward. Several of his trade expeditions were historical achievements: in 1789 he covered 1,600 miles and back in 102 days, and in 1793 he crossed the Rocky Mountains to reach the Pacific Ocean.

Other companies also envied the apparent monopoly of Hudson’s Bay Company. U.S. traders wanted a share in the fur trade following the Lewis and Clark expedition of 1804 to 1806. In 1808 Pierre Chouteau, William Clark, and five others established the Missouri Fur Company, and in New York John Jacob Astor, the leading fur dealer in the United States, started the American Fur Company, capitalized at US $300,000, of which he owned all but a few shares.

Peter Skene Ogden, who worked for a time for the American Fur Company, moved to Quebec after being appointed judge of the Admiralty Court in 1788. Ogden wanted to be among the first white men to see the great wilderness. After living in Quebec for six years with his wife and children, he was sent by North West Company into the interior of North America to clerk at the company’s post in what is today Saskatchewan Province. Ogden wintered on the prairies for the first time in September 1810, where he met Samuel Black, a Scotsman and also a clerk, who would become a lifelong friend. The two men made a sport of harassing Hudson’s Bay men. Among the tales cited by Gloria Cline, author of Peter Skene Ogden and the Hudson’s Bay Company, was that of the harassment of Peter Fidler of Hudson’s Bay Company. Fidler departed in three boats with 16 men for Churchill Factory on Hudson Bay, an important post, and Ogden, with two canoes full of Canadians, taunted the British traders for six days by keeping just ahead of them “to get everything from Indians that may be on the road, as they can go much faster than us,” according to Fidler. Ogden was a much valued employee of North West and was promoted as a result of his antics with Black.

Along with Ogden, the North West Company entrusted its goal of westward expansion to David Thompson. In 1807 Thompson had crossed the Rockies and reached the headwaters of the Columbia. In 1809 he again crossed the Rockies and established an outpost in what is now northern Idaho; from there he proceeded into Montana. Directly ahead of Thompson’s trading party was the first far-western expedition of John Jacob Astor’s Pacific Fur Company, the west coast subsidiary of American Fur Company. Although a U.S. company, it was managed by three Canadians, former Nor’westers—employees of North West. The War of 1812 altered hopes for Astor’s company, and the following year Pacific Fur Company sold all of its interests in the region to North West Company.

During the fall of 1818, Ogden took charge of David Thompson’s old post, near what is now Spokane, Washington. The following year Ogden returned east. In 1821 the two companies merged under the name of the Hudson’s Bay Company after the Nor’westers learned that their company was in poor financial condition. Ogden was excluded from the merger by the company because he had fought so fiercely, although he continued for the new firm as an explorer and trapper.

Gold Rush Difficulties

The next phase of the company’s growth was shaped by the 1849 gold fever that caused a great rush westward; almost 40,000 ‘49ers came west that year. Hudson’s Bay Company suffered as a result. Demand made the cost of basic goods skyrocket. Lumber rose from $16 to $65 per thousand feet; unskilled labor received $5 to $10 a day; sailors were paid $150 a month. The steady flow of gold, however, created a favorable balance of trade. With settlement, though, came new tax laws. In 1850 the Treasury Department prohibited trade between Fort Victoria and the English Vancouver Island and Fort Nisqually on the U.S. Puget Sound. This hurt Hudson’s Bay Company considerably because it legally tied up all vessels for custom inspection, which took them 350 miles off course, subjected them to twice crossing the hazardous Columbia sandbar, and made them pay heavy piloting fees at the customhouse port. To add to Ogden’s troubles in the western outposts of the company, the gold fever created labor difficulties, with many crewmen deserting to seek the possibility of finding gold. After several years of health problems, Ogden returned east for 18 months. Upon returning to his post in the western provinces, the strenuous trip and his advancing age took their toll; Ogden died in 1854.

Equal in importance to the growth of the company was Sir George Simpson, who served as administrator of the company for 40 years following the merger with North West. John McLoughlin, called the Father of Oregon, governed the district under Simpson with wide powers. Sir James Douglas assisted McLoughlin; he later became Governor of the Crown Colonies of Vancouver and British Columbia.

Company Perspectives:

The Company aims to develop its human and material resources and capitalize on its experience in merchandising to anticipate and satisfy the needs of customers for the goods and services they seek at fair prices, and thereby earn a satisfactory return for its shareholders.

When the westward settlement reached St. Paul, the British government tried to break the Hudson’s Bay Company monopoly by charging it with poor administration. A select committee of the House of the Commons investigated the charges, and with Sir George Simpson as one of the principal witnesses, the charges were dismissed. The company’s territory and the Northwest Territories became part of the Canadian Confederation through the British North America Act of 1867. The government of Canada transferred to itself the company’s chartered territory, Rupertsland, in 1870, in return for farm lands in the prairie provinces, which were sold to settlers over the following 85 years.

Early 20th Century Diversification, Including Retail

Demand for general merchandise increased, and shops were established on the outskirts of the forts. In 1912 a major remodeling and reconstruction of retail trade shops was interrupted by World War I. Following the war, the company diversified, incorporating elements of oil exploration in Alberta, revitalizing its Fur Trade Department, and venturing into the oil business as a favored partner of Hudson’s Bay Oil and Gas. After the 1929 stock market crash and Great Depression, the fur department revitalized itself, improving working conditions, and in some areas acted as an agent for Inuit Indian carvings.

Early in the 20th century the company made retail stores its first priority, building downtown department stores (known as the Bay) in each of the major cities of western Canada, moving east through acquisitions, and expanding into the suburbs of major Canadian cities beginning in the 1960s. Hudson’s Bay Company acquired Markborough Properties, a real estate company, in 1973; Zellers, a chain of discount department stores, in 1978; and Simpsons, a group of Toronto-area department stores, the following year. Kenneth R. Thomson, representing the family of the late Lord Thomson of Fleet, acquired a 75 percent controlling interest in the company in 1979.

Restructured in the 1980s

In the 1970s the company’s governor was Donald Mc-Giverin and George Kosich was chief operating officer. In that decade and into the 1980s, sales and oil prices slipped, while debt from acquisitions piled up. By 1985 the company owed C $2.5 billion and with feeble operating profits wiped out by C $250 million in interest payments, the company suffered its fourth consecutive yearly loss. In response, management shed assets, including the Bay’s 179 northernmost stores, some of which could be traced back to the fur trading days of Ogden. The company also divested its fur auction houses, thus cutting its last tie to its fur trading roots. In a strong attempt to survive, Thomson shook up top management, eventually appointing George Kosich, a career merchandiser, president. Thomson revamped retail operations. The combined market share of the three department store chains rose to 33 percent from 29 percent in two years.

Kosich refocused Simpsons to the upscale market and the Bay toward the middle- to lower-priced market. In repositioning the Bay, Kosich put the 300-year-old Canadian giant up against its closest U.S. counterpart, Sears. In 1985 the Bay had ten percent of the market and Sears had 27 percent. Employing an intensive advertising campaign—C $75 million—the Bay produced a bold and aggressive image before Canadians. In the first half of 1986, sales rose 13.2 percent over that of 1985. Operating profit rose to C $31 million in 1985 and to C $83 million on C $1.8 billion in total sales in 1986. Sears was feeling the results, reporting a barely three percent rise in 1986 and a downturn for the following several years. Zellers was positioned to appeal to the budget shopper as a “junior” department store. Club Z, a frequent-buyer program that allowed customers to accumulate points for prizes, boasted three million members. Hudson’s Bay Company reversed a formidable debt picture in 1987 by shedding nonstrategic assets such as its wholesale division and getting out of the oil and gas business. In 1990 it spun off its real estate subsidiary, Markborough Properties, as a separate public company. Shareholders received one share of Markborough for each share they held of Hudson’s Bay, with the Thomson family retaining a majority interest in Mark-borough. Also in 1990, the company bought 51 Towers Department Stores and merged them with Zellers.

In January 1991 Hudson’s Bay Company permanently left the Canadian fur trade, an estimated C $350 million market, when it stopped selling fur coats at the Bay stores; the Bay’s share of the fur trade had degenerated to a paltry C $7 million by 1990. The company also had been targeted by increasingly vocal antifur groups. Early in 1991 the company sold three million new common shares, with net proceeds of C $72.5 million. It also repurchased slightly more than two million Series A preferred shares for C $42.5 million. Company officials said these transactions would result in a stronger financial position. Because of declines in interest rates in the early 1990s, the Series A shares, with an eight percent dividend, had become more expensive to service than debt. Later in 1991 the company eliminated its Simpsons division, when it sold eight Simpsons stores to Sears Canada Inc. and converted the remaining six stores into the Bay units. Late 1991 also saw the Bay announce a three-year plan to double its purchasing of U.S. brands, a program that aimed at decreasing the number of Canadians seeking bargains in U.S. stores (because of a strong Canadian dollar) and that developed from the passage of the U.S.-Canada free-trade agreement in 1989.

Wal-Mart Challenge in the 1990s

In 1992 Thomson reduced his interest in Hudson’s Bay Company to 25 percent through a secondary stock offering; five years later this stake was reduced further through another secondary offering to zero. Meantime, in 1993 Hudson’s Bay Company acquired 25 former Woodward’s locations in British Columbia and Alberta, converting the sites to company formats. The company also acquired Linmark Westman International Limited, a buying firm in the Far East, that same year.

On the heels of strong 1993 results of C $5.44 billion (US $3.9 billion) and net earnings of C $148 million (US $108 million), Hudson’s Bay Company was caught somewhat off-guard when U.S. discounting giant Wal-Mart Stores Inc. entered the Canadian market for the first time in early 1994 through the purchase of 122 stores from Woolworth Corporation’s Canadian subsidiary. A price war quickly developed between the new Wal-Mart stores in Canada and the Zellers chain. In a little more than three years, Wal-Mart gained 45 percent of the discount market in Canada, surpassing Zellers, whose market share fell from more than 50 percent to 41 percent. Worse yet, the price war had cut severely into Zellers’s and, consequently, Hudson’s Bay Company’s profits. Net earnings at Zellers fell from a peak of C $256 million in 1993 to C $73 million in 1997, while overall net earnings (after interest and taxes) for the company fell to just $54 million in 1997. Compounding the company’s difficulties were reduced earnings at the Bay, which reflected a general downturn in the department store sector.

In responding to the Wal-Mart challenge, the company began to increase the size of its Zellers units, which had averaged 75,000 square feet in comparison with the 120,000-square-foot Wai-Marts. New Zellers that were built now ranged from 90,000 to 125,000 square feet. The company also began to renovate older units. In mid-1997 Hudson’s Bay Company hired a new president and CEO, William R. Fields, who had most recently been chairman of Blockbuster Video but was, more important, a 25-year veteran of Wal-Mart. (Kosich initially retired but within days was hired by T. Eaton Company Ltd., a chief rival of Hudson’s Bay Company, as president of the Eaton’s department store chain. The hiring resulted in Hudson’s Bay Company suing Eaton’s for stealing other company executives and accusing Kosich of breach of fiduciary duty for joining Eaton’s while still employed by Hudson’s Bay Company. The suit was settled quickly without terms being disclosed.)

Under Fields’s leadership Hudson’s Bay Company became much more aggressive in its pursuit of a turnaround. The most dramatic early example of this came in February 1998 when the company bought Kmart Canada Co. for C $240 million (US $167.7 million). The deal eliminated the number three discount retailer from the Canadian market and, in addition, leapfrogged Zellers back ahead of Wal-Mart. Over the next several months, Hudson’s Bay Company closed 40 of the 112 Kmart stores it had gained and converted 59 of the units to Zellers stores. Two Kmart stores and one Zellers were changed into Bay units, and 11 Kmart stores and one Zellers were selected to be converted into new specialty retail formats. This new specialty initiative was launched in June 1998 when the first Bed, Bath and More store opened in Newmarket, Ontario; the new chain was the first Canadian-based home category killer. Yet another development in the first few months of the Fields regime was the beginning of the conversion of the Fields chain into small general merchandise discount stores for the mass market, modeled somewhat after the U.S.-based Family Dollar chain. CEO Fields also launched efforts to improve the traditionally poor customer service at the Zellers chain and to make technology upgrades at both Zellers and the Bay aimed at improving inventory control. Finally, Fields made significant changes to the company’s management team. And in a move to pare noncore operations, the Linmark Westman subsidiary was divested in mid-1998. This whirlwind of activity in Fields’s first year indicated that Hudson’s Bay Company had entered into a new era of trailblazing.

Principal Subsidiaries

Hudson’s Bay Company Acceptance Ltd.; Zellers Inc.

Principal Divisions

The Bay; Fields Stores.

Further Reading

Burns, John F., “Fur Industry Shrinking with No End in Sight,” New York Times, February 26, 1991, p. Dl.

Cline, Gloria G., Peter Skene Ogden and the Hudson’s Bay Company, Norman, Okla.: University of Oklahoma Press, 1974.

Fox, Jim, “Fields Getting Hudson’s Bay Ready for Battle,” Discount Store News, June 23, 1997, pp. 3.

Gough, Barry, “Lords of the Northern Forest,” History Today, September 1991, pp. 49.

Greenberg, Larry M., “Besieged Hudson’s Bay Co. Starts To Blaze New Trails,” Wall Street Journal, February 13, 1998, pp. Bl, B2.

——, “Hudson’s Bay Faces Challenge from Southern Rival,” Wall Street Journal, May 24, 1996, p. B4.

——, “Hudson’s Bay To Buy Kmart Stores in Canada To Strengthen Position,” Wall Street Journal, February 9, 1998, p. B2.

Innis, Harold, The Fur Trade in Canada, Toronto: University of Toronto Press, 1967.

Matthews, Jan, and Boyd, Greg, “The March of a Retail Martinet,” Canadian Business, December 1990, pp. 32.

Newman, Peter C., “The Beaver and the Bay,” Canadian Geographic, August/September 1989, pp. 56.

——, Company of Adventurers (3 vols.), Markham, Ontario, and New York: Viking, 1985–91.

——, Empire of the Bay: An Illustrated History of the Hudson’s Bay Company, edited by John Geiger, Markham, Ontario, and New York: Viking, 1989.

Newman, Peter C., and Fleming, Kevin, “Three Centuries of the Hudson’s Bay Company: Canada’s Fur-Trading Empire,” National Geographic, August 1987, pp. 192.

Ray, Auther J., and Freeman, Donald B., Give Us Good Measure: An Economic Analysis of Relations Between the Indians and the Hudson ‘s Bay Company Before J 763, Toronto: University of Toronto Press, 1978.

Rich, Edwin Ernest, ed., Minutes of the Hudson’s Bay Company, 1671—1674, London, Ontario: Hudson’s Bay Record Society Publications, 1942.

Scally, Robert, “Hudson’s Bay To Buy Kmart Canada, Retool Zellers, and Unveil New Chains,” Discount Store News, February 23, 1998, pp. 1,40.

Seckler, Valerie, “Fields’s Playbook for Zellers,” WWD, September 10, 1997, p. 22.

—Claire Badaracco
—updated by David E. Salamie

HUDSON'S BAY COMPANY

HUDSON'S BAY COMPANY. The Hudson's Bay Company resulted from the western explorations of Pierre Esprit Radisson and Médard Chouart, Sieur de Groseilliers, in the mid-seventeenth century. On trips into Wisconsin and Minnesota country, they learned from Native Americans of a great fur country northwest of Lake Superior that might be reached via Hudson Bay. This idea, linked with one of a probable northwest passage through Hudson Bay, led the Frenchmen to England in the middle 1660s. There they assembled a sort of syndicate of wealthy and influential men that grew into the Hudson's Bay Company, and received its charter on 2 May 1670, as the Governor and Company of Adventurers of England Trading into Hudson's Bay. Under that charter and supplemental charters the company still operates, making it one of the oldest commercial corporations.

Much of the company's effect on the United States sprang from a bitter struggle that raged between it and the North West Company. During the heyday of the fur trade, the company had posts in most parts of what is now Canada and a few forts on U.S. soil, mostly along the boundary line west from Grand Portage. Near the Red River of the North (now Manitoba), Thomas Douglas, fifth Lord Selkirk—one of the North West Company's largest stock owners—had established a colony on company lands in 1811. The Hudson's Bay Company and the North West Company resolved many of their differences by merging in 1821, but Selkirk died in the same year, leaving the company to administer his colony. Members of Selkirk's colony had contributed to the establishment of Fort Saint Anthony (now Fort Snelling) in 1819, and the misfortunes of the colonists continued to lead many of them to emigrate to Fort Snelling, making them some of Minnesota's earliest European settlers. Red River cart traffic with Minnesota settlements, proximity to U.S. soil, and the colonists' discontent with company rule led to annexation hopes and schemes on both the part of the colonists and the United States between 1849 and the final surrender of the company's territories in 1869.

Missionaries provided the second major effect of the Hudson's Bay Company. Operating under the aegis of the company, they not only attempted to convert Native American and mixed-race groups, they also played an important part in the company's expansion into Oregon country. Company men appeared in Oregon in 1821 to carry on the fur trade begun years earlier by the North West Company. Although a joint occupation agreement existed between the United States and Great Britain from 1818 to 1846, Dr. John McLoughlin, the company's chief factor, helped Oregon become American by welcoming American traders, explorers, missionaries, and settlers. The decline of the fur trade and the threat of war were the final factors that convinced Great Britain in 1846 to abandon its claims south of the forty-ninth parallel. The Hudson's Bay Company continues to operate today, albeit without its monopoly of trade, its territory, and administrative rights in the West that were granted under its first charter.

BIBLIOGRAPHY

MacKay, Douglas. The Honourable Company: A History of the Hudson's Bay Company. Indianapolis, Ind.: Bobbs-Merrill, 1936.

Newman, Peter C. Company of Adventurers. New York: Viking, 1985.

Rich, E. E., ed. The History of the Hudson's Bay Company 1670–1870. London: Hudson's Bay Record Society, 1958–1959.

Grace LeeNute/f. b.

See alsoCorporations ; Fur Companies ; Fur Trade and Trapping ; North West Company .

Hudson's Bay Company English company chartered in 1670 to promote trade in the Hudson Bay region of North America and to seek a Northwest Passage. The Company had a fur trading monopoly and was virtually a sovereign power in the region. Throughout the 18th century, it fought with France for control of the bay. In 1763, France ceded control of Canada to England and the North West Company was formed. Intense rivalry forced the Hudson's Bay Company into a more active role in w exploration, and in 1771 Samuel Hearne proved the lack of a short Northwest Passage out of the Bay. The companies merged in 1821, with the new company controlling a territory from the Atlantic to the Pacific. After the Confederation of Canada (1867), challenges to its monopoly power increased, and in 1869 it was forced to cede all its territory to Canada for £300,000. As the fur trade declined in the early 20th century, the company diversified, and in 1930 was divided up.