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Shakeup at The Bay leaves investors rattled

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Bonnie Brooks's star power helped write the compelling retail turnaround story that sold investors on Hudson's Bay Co.'s unlikely return to the public equity market just eight months ago. Her charisma and track record of success were major drivers of and key selling points in November's initial public offering from the 343-year-old Canadian retail institution.

But suddenly, the public face of the successful "new" Hudson's Bay Co. appears to be leaving the spotlight. The company announced Tuesday that she will vacate the president's position to become vice-chairman; with Liz Rodbell, a low-profile executive vice president at the company, will take over as president. Ms. Brooks will act "in an advisory capacity" to chairman and CEO Richard Baker; it's thoroughly unclear what that means, and what her working relationship will be with Ms. Rodbell.

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For investors who climbed on board due in large part to the presence of Ms. Brooks as the company's operational leader and de facto saviour, the unexpected management shift so soon after the IPO must feel like a bait-and-switch. The move raises questions about how the company plans to navigate Canada's increasingly competitive chain-store waters.

Mr. Baker, the U.S. private equity investor who installed Ms. Brooks as president five years ago to inject a new look, serious fashion chops and charismatic leadership into the business, insists that Ms. Brooks hasn't been pushed aside – she's been promoted. But the fact is, her hands have been removed from the operational levers of the company. A "promotion" to vice-chairman, particularly when we're talking about a 60-year-old executive, is traditionally more a prelude to retirement than a new mandate to lead.

While Ms. Brooks was very successful in the company's much-needed makeover, taking it from near-death to IPO, the next stage for the business is going to be a difficult one – requiring a long-term commitment and a very different skill set. The arrival in Canada of major U.S. chains Target and Nordstrom is going to make the Canadian retail business a dog fight for market share and positioning over the next several years, one that could be a nasty battle of attrition.

Some analysts have speculated that Hudson's Bay may be destined to get rid of underperforming stores in favour of capitalizing on the highly valuable real estate on which they sit, shrinking the chain down to a smaller number of upmarket boutiques and abandoning its everytown-retailer past. Selling real estate is a long way from selling a new image and an IPO.

It could be that Ms. Brooks wasn't prepared to tackle the task this close to her retirement years. Or it could be that Mr. Baker and the board decided she wasn't the best person to lead this new charge, anyway.

For investors, though, this leaves a cloud of confusion over a stock that already looked bogged down by an uncertain retail environment. The shares closed Tuesday at $16.25, down nearly 5 per cent below the IPO price of $17. Competitors are banging at the gates, the president who led the company out of the darkness may or may not still have a leadership role, and the little-known new president may or may not be in charge. A lot has suddenly changed from what they bought into eight months ago.

David Parkinson is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow him on Twitter at @parkinsonglobe .

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About the Author
Economics Reporter

David Parkinson has been covering business and financial markets since 1990, and has been with The Globe and Mail since 2000. A Calgary native, he received a Southam Fellowship from the University of Toronto in 1999-2000, studying international political economics. More

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