Canada: Why Hudson’s Bay’s European Initiatives Spell Greater Growth
The Hudson’s Bay Company’s expansion into Europe makes good sense. It is leading to transformation and driving growth. The opportunity for HBC globally is great, providing an offset to the battle for market share its domestic stores are waging in mature markets, including Lord & Taylor, Saks Fifth Avenue and the Bay in Canada. I see the following seven initiatives as key growth drivers:
The company has announced plans to open 13 stores over the next two years under the Hudson’s Bay banner in the Netherlands. The first store will open in the summer of 2017. The goal is to operate 20 department store units. One of the locations will be a Saks OFF 5th.
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Management has chosen Cologne, the headquarter location of Galeria Kaufhof, as the headquarters for HBC-Europe, thus directing expansion activities from a central location. The head office will undergo a major renovation to accommodate both the Galeria Kaufhof operation as well as the European expansion.
HBC is reconceptualizing the German Galeria Kaufhof stores. A major renovation in the Düsseldorf Galeria Kaufhof store will reallocate space for major departments, step up the customer service and add glamour to shopping. It will become the prototype for 10 additional stores in Germany.
Saks OFF 5th will be introduced in Germany in the summer 2017. This premium off-price concept now has about 110 outlets in the United States and is very successful. The Gilt concept, that was acquired in January 2016, has found strong appeal in these stores. In Düsseldorf there will be the flagship store. Additional stores have been planned for Frankfurt, Stuttgart, Heidelberg and Wiesbaden. The company plans to bring in about EUR 1 billion in sales from this premium outlet concept in Europe over the next five to seven years.
Reflecting a focus on service, shoes and cosmetics, two service intensive departments, will see increased service along with several other departments. It has been a tradition to self-select shoes with no sales assistance in Germany. It is reasonable to expect a ramp-up of sales and greater customer satisfaction when this initiative is implemented. Another key customer service initiative is the exploration of robotic technology to expedite the processing of orders.
The company will open the third Canadian Saks Fifth Avenue store in Quebec. The store will be located within the Hudson’s Bay store. Two stores are already open in Toronto’s Eaton Center and Sherway Gardens. Another store is slated for Calgary.
New York City’s Saks Fifth Avenue is undergoing massive renovation in anticipation of new competition in the city. In the next two and three years Neiman Marcus and Nordstrom will open flagship stores and all department stores are preparing for the new competitive challenges.
Second quarter sales were in line within expectations. On a constant currency basis department stores increased 1.1%, off price decreased a surprising 11.4%, Saks Fifth Avenue decreased 1.3% due to lack of tourist traffic, and Europe decreased 0.9%. Total sales increased 59.6% to C$3.3 billion. The company reported a net loss of C$142 million reflecting a C$133 pre-tax gain in the same quarter in 2015 relating to the joint Venture.
HBC’s leadership is strong with Richard Baker, Governor and Executive Chairman, and Jerry Storch, CEO, leading the company. I believe that HBC will be the first truly global retail department store company with additional opportunities for expansion.
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