Hudson’s Bay shares sail into rough retail waters

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It is hard to read a press release or story about Hudson's Bay Co. without a reference to its 342-year history. That must provide some comfort to investors, now that the shares have begun trading on the open market: If the company has adapted to the end of the fur trade, surely it can navigate the ultra-competitive landscape of Canadian retailing today, where U.S. companies are setting up shop regularly.

HBC shares began trading officially on Monday, following an initial public offering that valued the shares at $17 each. While the IPO valued the company at $2-billion, the offering was for just 18 per cent of the company. In early trading on Monday, the shares were down slightly, to $16.80.

The question, of course, is whether the stock is attractive. As anyone will tell you, Canadian retailing is a tough market right now due to existing U.S. competition. And there's more coming: Target Corp. is gearing up for the launch of Canadian stores within a year and Nordstrom Inc. is also making plans to open stores here.

While U.S. retailers have been attracted to Canada because of robust consumer spending here, that could easily shift: Consumer debt levels are at absurd levels, suggesting that a wave of personal austerity could easily follow.

The upside: The competitive retailing environment is probably priced in. The $17 price of the shares was at the low end of an already reduced range. And the Canadian IPO market in general is also weak, suggesting that the appetite for new issues isn't exactly ravenous. Bloomberg News reported that money raised through IPOs this year is down 19 per cent over last year and is proceeding at the slowest pace since 2009. In a contrarian sort of way, perhaps expectations for HBC are relatively low.