Luxury apparel retailer Saks (NYSE:SKS) has agreed to be bought by Hudson's Bay, which also owns Lord & Taylor, for $2.9 billion. But the two fashion chains will continue to operate separately, with as many as 32 new Saks stores opening in Canada.
There's no real overlap between the two chains because Lord & Taylor is a little less upscale, Hudson's Bay chairman Richard Baker said in an analysts' call on Monday (July 29). "Where Lord & Taylor ends is where Saks begins," he said, according to the Globe and Mail.
Baker also said that he doesn't expect to close or rebrand stores for either chain in the U.S., even in the "handful" of cases where they have stores in the same mall. He also plans to open Saks stores in Canada—up to seven full-line Saks stores and 25 Off-5th discount stores. Some of those could be inside operating Hudson's Bay stores or as conversions of existing stores. The combined companies would have 320 stores.
Bringing Saks to Canada would also make it the first major Canadian luxury retailer that also does e-commerce. The luxury Holt Renfrew chain hasn't yet launched online shopping.
The deal has been approved by both companies' boards but still needs approval from Saks shareholders, and Saks has 40 days to seek competing bids. Without any such glitches, the sale is expected to close by the end of the year.
A month ago, when Hudson's Bay first publicly showed interest in Saks, speculation was that Baker—a U.S. real-estate magnate—would clear out Lord & Taylor stores from their pricier locations to make money from the merger. That doesn't seem to be the plan after all. Instead, the idea is to have three-tiered branding, with luxury Saks, upscale Lord & Taylor and (in Canada) mainstream Hudson's Bay.
How well that will work is unclear, as Saks and Lord & Taylor still struggle to return to pre-recession sales levels. But it's clearly a bet on department stores, especially in Canada where Hudson's Bay, the largest Canadian department store chain, faces new competition with Target (NYSE:TGT) and Nordstrom (NYSE:JWN) crossing the border.
And it's certainly a more upscale three-tiered model than Hudson's Bay had before, when Lord & Taylor was at the top end and the Zeller's discount chain was at the bottom. Hudson's Bay shut down the Zeller's chain last year and leased many of the locations—to Target.
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