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Saks stores coming to Canada

HBC to buy high-end retail chain for US$2.9B; Winnipeg in the running for stores

Hey there, time traveller!
This article was published 30/7/2013 (1483 days ago), so information in it may no longer be current.

TORONTO -- Luxury U.S. retailer Saks will soon open its doors in Canada with plans to launch up to seven stores north of the border, after being snatched up Monday by Hudson's Bay Co. for US$2.9-billion.

In addition to expected operational savings of about $100 million and a portfolio of prime U.S. real estate, one analyst said the deal will give HBC greater fashion credibility.

HBC might turn some of its stores into Saks locations, open new Saks stores in existing buildings, or construct new stores. The high-end chain will bring premium brands.


HBC might turn some of its stores into Saks locations, open new Saks stores in existing buildings, or construct new stores. The high-end chain will bring premium brands.

People walk past a Hudson's Bay Co. store sign in Toronto on Monday


People walk past a Hudson's Bay Co. store sign in Toronto on Monday

"Saks is such a revered name in fashion," said Wendy Evans of Evans and Company Consultants Inc. in Toronto.

"It's been around for a long, long time -- since the 1920s. There's an aura about it."

Evans said the deal will broaden the selection of premium brands available to Canadians, including the in-store Saks line, and will also give HBC access to some of the retailer's designers.

The high-end U.S. department store chain carries brands such as Gucci, Prada, Giorgio Armani, Chanel, Louis Vuitton and Dolce and Gabbana.

Richard Baker, HBC's chairman and chief executive, didn't provide a timeline for the launch.

"We're going to move as quickly as we can," he told analysts during a conference call Monday.

Saks currently operates 42 stores across the U.S., while HBC's holdings include 90 Hudson's Bay stores and 69 Home Outfitters in Canada.

HBC also owns 48 Lord & Taylor luxury retail stores in the U.S. Northeast.

Together, the combined company will comprise more than 32 million square feet of retail space and rake in about C$7.2 billion of sales annually.

HBC said it may transform some of its Hudson's Bay stores into Saks locations, open new Saks stores in existing buildings or, in some cases, build new stores from the ground up.

HBC spokesperson Tiffany Bourre confirmed in an email the company plans to open up to seven full-line Saks stores and up to 25 Saks Off Fifth locations in Canada.

"We are looking at major centres across Canada, and Winnipeg will be part of this review," she added.

She sidestepped a question about whether HBC might consider putting a Saks outlet inside its existing six-storey downtown HBC store, which is more than half empty.

HBC and local government and real estate industry officials have been trying for nearly a decade to come up with a redevelopment plan for the massive historic building. One of the options that had been bandied about was putting a number of HBC's retail brands under the same roof.

"There are no new updates with regard to the building," Bourre said. "However, we continue to discuss options for the property."

One of the city's leading real estate developers -- Shindico Realty Inc. president Sandy Shindleman -- tried unsuccessfully for three or four years to find new tenants for the downtown store.

He said Monday that while he thinks Winnipeg has a shot at landing one of the Saks Off Fifth discount outlets, he doesn't think HBC would put it in its downtown HBC store because the floor plate there -- 80,000 square feet per floor -- is just too big. He said a Saks store wouldn't need even half of one floor.

A more likely location is the Polo Park area, he said, where HBC already has a Hudson Bay and a Home Outfitters store. So putting a Saks in the same area would give HBC customers another reason to go there.

Shindleman said HBC officials will consider the new retail centre Shindico and Polo Park Shopping Centre owner Cadillac Fairview are building on the former Canad Inns stadium site immediately north of the existing shopping centre.

"We will certainly be putting our oar in the water," he added.

Even if the downtown HBC store doesn't get a Saks outlet, Shindleman said it could still benefit from the acquisition because it gives HBC added buying power.

"So it might be easier to operate a store in downtown Winnipeg," he added.

Shindleman said the Saks deal is also good news for the Canadian real estate industry because it reaffirms HBC's commitment to the Canadian market.

For some Canadian shoppers, news of the upscale chain's foray into Canada, was overdue.

Adrian Salamunovic, a business owner who lives in Ottawa, said he's been shopping at Saks for about seven years.Salamunovic, 37, was thrilled to hear Saks will be opening up to 25 of its Saks Off Fifth outlet stores in Canada, which sell designer brands at discount prices.

Salamunovic said he often visits these stores when he's staying at his second home in Los Angeles to pick up brands such as Vince, John Varvatos and the Made & Crafted line by Levis -- all of which he says are difficult to find in Canada.

Paul Swinand, an analyst with Morningstar in Chicago, said the prime real estate portfolio was likely one of the biggest draws for HBC.

"There's no way they could have accessed these real estate assets at any other price, or in any other way," said Swinand.

"These are assets in locations where you couldn't get that size of a store otherwise."

The Toronto-based retailer is also eyeing the possibility of starting a real estate investment trust.

"The combination of Saks and HBC real estate creates an unmatched, highly valuable North American retail real estate portfolio, with a coast-to-coast footprint serving three strong banners," Baker said.

Baker said HBC will keep the stores under separate banners, and plans on renovating the Saks stores and working with more vendors to make the chain "as luxurious as possible."

"We think that Saks is very well positioned in the luxury market in the United States, but we think there's a great opportunity to improve that positioning," he said.

HBC, which has been eyeing the struggling high-end American chain for the past few months, said it will pay US$16 per Saks share plus assume debt as part of the transaction.

It will issue US$1 billion worth of equity and $2.3 billion of debt securities to pay for Saks.

Hudson's Bay Co. will also issue US$1.9 billion of secured loans and US$400 million of unsecured notes.

Saks will pay a fee to HBC if the deal doesn't go through, but HBC would not specify the amount.

-- The Canadian Press, with files from Murray McNeill


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Updated on Tuesday, July 30, 2013 at 6:32 AM CDT: adds photos

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