Hudson’s Bay Co. is launching its prize acquisition, Saks Fifth Avenue, north of the border, and putting the first two stores in places where Nordstrom Inc. can’t miss them.
HBC will carve out about 150,000 square feet of its 750,000-square-foot downtown Toronto Hudson’s Bay flagship to open its first Saks store in Canada in fall 2015. In spring 2016, Saks will open a second Canadian unit, a 130,000-square-foot store at Sherway Gardens, also in Toronto.
In plotting Saks’ entry into Canada, HBC agreed to sell its downtown Toronto Hudson’s Bay flagship and adjacent Simpson’s Tower office complex to Cadillac Fairview Corp. for 650 million Canadian dollars, or $611 million at current exchange, and lease back both properties. The Saks store will come out of the space currently operated as Hudson’s Bay at the corner of Queen and Yonge Streets.
Cadillac Fairview owns and manages not only Eaton Centre and Sherway, but also Chinook Centre in Calgary, where Nordstrom plans to open its first Canadian unit this fall; Rideau Centre in Ottawa, where Nordstrom is scheduled to open in spring 2015, and Pacific Centre in Vancouver, where Nordstrom has set a fall 2015 opening. Nordstrom’s sixth opening in Canada will be in fall 2016 at Toronto’s Yorkdale Shopping Centre, which is owned by Oxford Properties and Alberta Investment Management Corp.
HBC’s lease on the properties runs for 25 years and has a renewal option for an additional period of “just under 50 years,” the company said.
HBC completed its $2.4 billion acquisition of Saks Inc. last year, teaming it with Hudson’s Bay and its earlier acquisition of New York-based Lord & Taylor.
Richard Baker, chairman and chief executive officer of HBC, told WWD that Saks’ plans for seven full-line stores in Canada are likely to include units in Vancouver, Montreal and Calgary as well as Off 5th units and Canadian-based online businesses for its Saks and Lord & Taylor brands.
Borrowing a page from the playbook of Harrods, from which Baker lured Marigay McKee to become president of Saks, the two new Saks stores will both have food halls of about 25,000 square feet. “That is new to the Saks concept,” he said.
Baker said he wasn’t looking into other asset sales or sale-leaseback arrangements like the one struck with Cadillac Fairview. “But we continue to look at options to monetize real estate such as a REIT [real estate investment trust] like the one recently done by Loblaw Cos.,” he said.
Loblaw last summer raised $400 million in an initial public offering of its real estate assets. Simon Property Group is also planning to spin off its strip centers and smaller malls into a separate public company called SpinCo.
Baker noted that HBC and its predecessor companies have actively worked the real estate markets in recent years, including the sale of Zellers leases to Target Corp. in 2011 for $1.8 billion. The sale-leaseback arrangement, expected to close on or about Feb. 25, involves some but not all of the properties purchased by HBC for $1.2 billion in 2008.
“It’s a very accretive transaction,” Baker said.
Doug Stephens, founder of the consulting firm Retail Prophet in Toronto, has his doubts about the Saks move to Toronto’s Bay Street; many expected the retailer to first open on the city’s Bloor Street, generally considered “the Fifth Avenue of Toronto.”
“This makes some sense financially, but purely from a branding standpoint you would think they would go to Bloor Street and be in very direct proximity to other luxury players,” he said. “The Bay itself has a lot of baggage at Eaton Centre — some good, some bad — but you would think that if you’re bringing a new upscale brand into the Toronto and Canadian markets, you would want it to be your Holt Renfrew slayer and your Nordstrom slayer. My feeling was that it should be on Bloor, brilliant and very distinct.”
He said HBC needed to be wary of the fate that has befallen Target which, he said, had “overpromised and underdelivered” in its problematic Canadian entry, with assortments that haven’t matched consumers’ expectations and occasionally inventories that haven’t even met demand. Nordstrom, he noted, has an excellent track record of entering new markets in the U.S. “They don’t take things for granted or rest on their laurels, ever,” Stephens said.
Like Stephens, Antony Karabus, president of Hilco Retail Consulting and a resident of Toronto, sees a lesson in Target’s experience as Canadians prepare for an upscale invasion of retailers from the south.
“Canadians are very astute,” he said. “Unlike a lot of Americans who don’t shop outside the U.S., Canadian shoppers shop across the border constantly, and if the Canadian version of the store doesn’t meet the expectations they had from shopping that store in the States, there’ll be problems, as there have been for Target.”
He thinks Canadians will take well to both Saks and Nordstrom, however. “It’s like going from the wilderness of luxury to being like kids in the candy store,” he said. “There’s nothing but upside for the consumer, for developers and for the job market.”
In trading on the Toronto Stock Exchange Monday, HBC shares rose 1.2 percent to 16.89 Canadian dollars, or $15.88.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty