HBC to open 40 Saks Off 5th stores in Germany, spend $1.5 billion on expansion

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This article was published 05/04/2016 (3507 days ago), so information in it may no longer be current.

TORONTO – Europeans are hungry for a better shopping experience, according to the top brass at Hudson’s Bay Co., who say North America’s oldest retailer is planning a major overseas expansion.

“Our plans are to experiment in Germany,” HBC’s governor and executive chairman Richard Baker told analysts during a conference call Tuesday to discuss the company’s fourth-quarter results.

“We see huge opportunity in full-service women’s shoes, in full-service cosmetics, in handbags and the other traditional department store businesses.”

The owner of Saks Fifth Avenue, Lord & Taylor and Hudson’s Bay department stores says it is plans to open 40 Saks Off 5th discount stores in Germany, beginning in 2017.

The Saks Off 5th stores will be open in locations already owned by the company in Germany, while it keeps an eye out for more expansion opportunities in other parts of Europe.

The store openings are part of a nearly $1.5 billion investment HBC plans on pumping into its European properties over the next seven years, including renovations to its Kaufhof department stores.

Hudson’s Bay (TSX:HBC) bought the largest department chain in Germany and Belgium, Galeria Kaufhof, for $3.9 billion last year.

Baker and HBC chief executive Jerry Storch, say they plan on bringing the same formula that has worked on their transformation of Canadian Hudson’s Bay stores and applying it to Kaufhof.

That includes ensuring departments in the stores are “right sized” to the customers, and offering full-service options when needed.

The two credit this formula for the success of its banners in Canada and the U.S. amid an environment crowded with rivals.

“We believe being a multi-brand department store with a variety of high and low and different categories and products,” Baker said in an interview.

“That’s what our customers want and that’s what’s exciting for them.”

And despite talk about the death of the department chains, Storch said customers still like to shop in large, renovated stores and stores within stores where they can pick and choose from a variety of price points.

The grand opening of Saks Fifth Avenue inside Hudson Bay’s flagship store in downtown Toronto last February was one of its highest performing openings and also increased sales next door for Hudson’s Bay, Storch said.

“There’s a lot of talk about, ‘Are there too many stores in the retail world in this Internet era?’ Storch noted during the call.

“We think there are too many bad stores. That’s the real answer. If we make them all as great as (our flagship) store, we’re going to do fantastic and the other guys are going to be the ones who suffer.”

The company reported after markets closed Monday that fourth-quarter revenue soared 70.4 per cent to $4.486 billion from $2.632 billion in the same year-earlier period, primarily as a result of the addition of HBC Europe following the close of the Galeria Kaufhof acquisition.

Net earnings rose to $370 million, or $1.88 per diluted share, for the three months ended Jan. 30. That was up from $115 million, or 62 cents per diluted share, in the comparable year-earlier period as the company realized $516 million on the sale of investments in its real estate joint venture.

On a constant currency basis, HBC said consolidated comparable store sales — an important metric in retail — increased by 1.8 per cent for the quarter and 2.5 per cent for the year.

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Note to readers: This is a corrected story. A previous version gave the incorrect purchase price for Kaufhof