Lord & Taylor sold for $100 million to clothing-rental company Le Tote

Lord & Taylor, one of the nation's oldest department stores, is being sold for $100 million to a rental clothing company.

Le Tote is buying the company from Hudson's Bay Co., which gets a minority stake in Le Tote and will control two seats on its board.

Lord & Taylor, founded as a dry goods store in 1826, has struggled recently as more people move their shopping online. The upscale chain has closed several stores nationwide, leaving 38 active today.

Its flagship store, on New York City's Fifth Avenue, shut its doors for good earlier this year after more than a century in the 11-story building. In the store's final days, clothes that once sold for as much as $100 were going for $5.99. The building was sold to the space-leasing company WeWork for $1.1 billion.

Le Tote, created less than a decade ago in San Francisco, said Wednesday that it plans to bring clothing rental to Lord & Taylor's customers. With clothing rental, popularized by Rent the Runway and other startups, customers pay a monthly fee to get clothes shipped to them, wear a few times and then ship them back.

Traditional retailers, such as Urban Outfitters and Banana Republic, are launching their own versions. Urban Outfitters, which announced its service in May, said the model was made popular by the rise of the sharing economy and changing consumer habits, "driven by the young generation's hunger for newness while embracing sustainability."

Le Tote will pay Hudson's Bay $75 million in cash when the deal closes, which is expected to happen before the holiday season. It will also pay Hudson's Bay $25 million in cash after two years.

Hudson's Bay, based in Canada, plans to invest in its better-performing businesses like Saks Fifth Avenue.