Hudson's Bay will pay about $2.9 billion, including taking on Saks debt. Hudson's Bay could open as many as 7 full-line Saks stores in Canada, as well as up to 25 Off 5th discount locations. It could also create a real estate investment trust from Saks real estate assets, valued at about $1.5 billion.
Last week we reported that Barry Sternlicht of Starwood Capital was bidding on Saks, and that he was the frontrunner. Sternlicht since dropped his bid after his business partner decided against the deal.
We reported on the three potential Saks buyers, including Hudson's Bay, Sternlicht and an unknown Middle-Eastern purchaser. With Sternlicht out of the race, only two potential purchasers remained.
|Hudson's Bay Company Chairman Richard Baker [Image Source]|
Hudson's Bay may find it difficult to make Saks succeed in Canada. Holt Renfrew achieves substantial sales per square foot. Excluding Saks' Manhattan and San Francisco flagships, Holt Renfrew stores achieve considerably higher sales per-square-foot than most Saks stores. Not to mention, Holt Renfrew has exclusive distribution agreements with many designers already carried at Saks' American stores.
With Nordstrom on the way, Harry Rosen in expansion mode and La Maison Simons looking to expand its Canadian base, opening Saks Fifth Avenue in Canada could prove to be challenging for HBC. At the same time, an HBC-owned Saks Fifth Avenue may lend substantial credibility and economies of scale to HBC.
Saks' outlet concept 'Off 5th' is also expected to come to Canada. Off 5th carries both discounted merchandise from Saks' full-priced stores, as well as products purchased specifically for the outlet store. Off 5th stores will compete with Nordstrom Rack and Holt Renfrew's recently opened hr2 concept.
Saks' purchase by HBC will lead to Saks stores opening in Canada, either free-standing or within existing Hudson's Bay store space. Last month we first reported on HBC's potential purchase of Saks. We subsequently discussed possible Canadian Saks locations. HBC has been contemplating a potential Saks purchase for months and we're re-posting our analysis of some possible locations for Saks in Canada.
|Hudson's Bay, Bloor Street, Toronto [Image Source]|
Downtown Toronto: Hudson's Bay's 851,000 square foot flagship 'Queen Street' store has room for a Saks store, though it would require an awkward reconfiguration of the store's current setup. We're not sure if a Saks would be preferable up at the Yorkville Hudson's Bay while the Queen Street location remains as the primary flagship location for Hudson's Bay and its related concessions (including a 19,000 square foot TopShop/TopMan and a 20,000 square foot Kleinfeld Bridal, which opens on the store's seventh floor next year).
|Hudson's Bay, Downtown Calgary [Image Source]|
|Hudson's Bay, Downtown Vancouver [Image Source]|
|Hudson's Bay, Rideau Street, Ottawa [Image Source]|
Rideau Centre: A Saks Shop-in-store (or even a smaller full-line Saks) carved out of the 335,000 square foot Ottawa Rideau Street Hudson's Bay store would compliment Rideau Centre's Nordstrom store (which will open in 2015) as well as La Maison Simons, also in 2015. Competitor Holt Renfrew, located way over at 240 Sparks Street in Downtown Ottawa, could see an uncertain future as a result of a Saks opening in Ottawa.
Finding a suitable location for Saks in Edmonton might be a challenge, though some sort of Saks shop-in-store might work within Hudson's Bay's 237,000 square foot Southgate Shopping Centre store. The West Edmonton Mall Hudson's Bay, at only 164,000 square feet, would likely be too small for any Saks configuration. Downtown Edmonton's Holt Renfrew, one of the chain's lesser-performing stores, could see a reduction in sales with a Saks opening in one of Edmonton's suburban malls.
We've consulted with a retail analyst who says they're not sure if Montreal's economy or language laws would welcome Saks Fifth Avenue to the city at the moment. Downtown Montreal has a 655,000 square foot Hudson's Bay store that is currently undergoing renovations to include luxury department 'The Room'.
We'll keep you updated on HBC's possible Saks purchase. As we mentioned, an announcement could be made as early as this week.
***Update (8:00pm PST, July 28 2013) The New York Post also reports Saks has been bought by HBC. Update: 8:18pm PST The Globe & Mail reports HBC is expected to pay about $16 (U.S.) a share for Saks, making a purchase price of about $2.4 billion.***
[HBC Press Release]
[Saks Fifth Avenue website]
[Hudson's Bay Company website]