Photograph by Shannon Stapleton — Reuters

Saks is prepping for its Canada expansion, rolling out more outlet stores and beefing up its e-commerce, all with a goal to lifting the performance of its owner HBC and helping sister chains Lord & Taylor and Hudson's Bay.

By Phil Wahba
April 7, 2015

Saks Fifth Avenue might have been the last addition to the Hudson’s Bay HBC empire of three major department store chains, but the luxury retailer is leading the pack.

Not only did Saks, which HBC bought in 2013 for $2.4 billion, outperform its sister chains Lord & Taylor and Canada’s Hudson’s Bay in terms of comparable sales growth in 2014, the chain also generated 72% of HBC’s overall e-commerce sales that year, despite accounting for about 36% of company sales.

And despite some turmoil at Saks — the company’s star executive, Marigay McKee, left last week after only 15 months for reasons unknown (though Vogue surmised on Tuesday that a poor cultural fit rather than her vision for Saks was the culprit) — that banner is set to lead the charge for HBC’s growth this year.

For one thing, HBC executives say they are speeding up the pace of the Saks Off Fifth outlet stores in 2015 to benefit from what HBC executives said was by far the fastest growing area of retail. (HBC currently has 77 Off Fifth stores, twice as many as the number of Saks department stores, but still far from the 200 outlet stores it expects to ultimately have.)

For another, they will spend a good part of the year getting ready to open the two Saks Fifth Avenue department stores slated to open in Toronto next year. HBC CEO Jerry Storch told analysts he sees room in Canada, where Nordstrom JWN just opened a second store, for as many as seven Saks Fifth Avenue stores and 25 Off Fifth stores at some point. “There is a substantial opportunity for Saks Fifth Avenue and Saks Off Fifth in Canada,” Storch said.

But it’s in the realm of e-commerce that Saks has turned HBC into a serious player. Last year, $660 million of the $900 million in e-commerce sales HBC generated came from Saks, showing how far behind Lord & Taylor and Hudson’s Bay are and how important Saks’ e-commerce firepower will be in helping those.

“We continue to improve the nuts and bolts of each of our websites, in particular the Saks Fifth Avenue web site is excellent. But we haven’t been as strong with the Lord & Taylor and Hudson’s Bay web sites, and we’re going to work very hard to bring those up to the state of the art,” Torch said.

Indeed, e-commerce accounts for about 20% of Saks’ e-commerce, in line with e-commerce leading archrivals Nordstrom and Neiman Marcus, but for L&T and Hudson’s Bay, it’s more like 4-5%, well below leading department stores.

And with the company expecting same-store sales to rise by a low single digit percentage this year, e-commerce is key.

As for Saks, despite the second changing of the guard in 18 months, the company says it will continue to take Saks Fifth Avenue even further upscale and add more exclusivity. McKee was credited with luring brands such as Balmain, Balenciaga and Alexander Wang to Saks.

“We’re going full steam ahead with the strategy of elevating the Saks brand,” Storch said.

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