Hudson’s Bay Company

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