[Image Source]

Hudson's Bay Company CEO Richard Baker says that he expects up to 7 Saks Fifth Avenue stores to open in Canada. He also says he wants them to open quickly. The quickest and most cost effective way to do this would be to open Saks within existing Hudson's Bay store space. 

Despite having possibly paid too much for Saks, Richard Baker is a shrewd businessman who knows real estate. Given this, we expect his vision for a Saks rollout will involve configuring some existing Canadian Hudson's Bay store space into space for Saks. It remains to be seen how, exactly, this configuration will take place. 

Furthermore, it would make less financial sense to build entirely new Saks store space. Hudson's Bay already has millions of square feet in Canada, some of which it owns outright. It would make more sense to utilize existing underperforming space rather than create new spaces that would be expensive to build and would take time to plan, design and construct. 

Recently renovated designer floor at Saks, Manhattan. [Image Source]

Existing Hudson's Bay stores generally earn less than $200 per square foot. Saks' Canadian stores could generate triple that amount, or even more, if successful. Utilizing some existing HBC real estate would involve gutting and re-fitting space for which the retailer either pays minimal or no rent. We would be surprised to see many, if any, newly built Saks stores in the short term. 

Over the longer term, if Saks is successful in Canada, it could possibly see some newly built, free standing Canadian stores. With competition from Holt Renfrew and Nordstrom, however, we think Saks Fifth Avenue's Canadian business will be challenged.

Yesterday we reported on our initial speculation as to where we think Saks stores could open in Canada. We'll periodically update our opinions. 

We will be regularly analyzing Saks Fifth Avenue's opening in Canada from various angles, especially in the coming weeks. Please check back regularly, as we'll also be keeping an ear to the ground to see what management has planned for new Canadian Saks stores.