Hudson’s Bay Co., seeking to accelerate growth on several fronts, has brought in Gerald “Jerry” Storch as its new chief executive officer.

This story first appeared in the December 18, 2014 issue of WWD. Subscribe Today.

Richard Baker, who held the ceo job, will continue as governor and executive chairman of HBC, with Storch reporting to him. Baker and Storch will comprise the office of the chairman.

In another top-level shift, Don Watros, who was president of the company, has become president of the group’s new international unit to identify and launch international businesses and operate them, though no possibilities were disclosed Wednesday.

International growth could involve an acquisition or furthering Saks Fifth Avenue’s overseas presence. “We are really not ready to have any discussion about international,” Baker told WWD.

Starting Jan. 6, Storch will be responsible for Hudson’s Bay, Lord & Taylor, Saks Fifth Avenue, Saks Off 5th, Home Outfitters and HBC Digital. Now the heads of HBC’s divisions, including Marigay McKee of Saks Fifth Avenue, Liz Rodbell of Hudson’s Bay and Lord & Taylor and Jonathan Greller at Saks Off 5th will report directly to Storch instead of Baker and Watros.

With Storch on board, Baker will be freed up to concentrate more on international expansion, acquisitions and real estate, and less on day-to-day operational activities now in the hands of Storch.

“Having Jerry as the ceo gives me some additional time to focus on the three core activities that I generally like to focus on — the international opportunity, our real estate opportunities, and potential mergers and acquisitions,” Baker said. “I still will be involved in participating and understanding the operations of our existing businesses and how we invest our capital. Jerry and I will be partners in all endeavors of the Hudson’s Bay Co.”

With the exception of three licensed Saks Fifth Avenue stores — two in the Middle East and one in Kazakhstan — HBC’s stores operate in North America. Saks also has two licensed stores in Mexico.

“We live in a growing, dynamic global society,” Baker added. “There are opportunities outside the U.S. and Canada to create value.”

The Neiman Marcus Group is already aware of that. Last fall, NMG bought, an upscale online business based in Munich, Germany which also has one store, in Munich, thrusting Neiman’s into the international arena in a big way. Baker could be considering a similar move, or a brick-and-mortar deal. He has been eyeing Neiman’s for some time, though an acquisition couldn’t happen soon since the luxury retailer was purchased by Ares Management LLC and Canada Pension Plan Investment Board just last year.

On the home front, Baker has been pushing the expansion of the Saks Off 5th outlet chain; the businesses at Lord & Taylor and Hudson’s Bay department stores, which are relatively new compared to the more advanced; synergies and cost savings; investments in top-performing doors such as the Saks and Lord & Taylor flagships in Manhattan, and unlocking value with HBC’s real estate holdings. In November, HBC completed a $1.25 billion, 20-year mortgage on the ground portion of the Saks flagship on Fifth Avenue to reduce debt and strengthen the balance sheet. The company said the flagship was appraised at $3.7 billion. HBC purchased Saks last year for $2.9 billion, including debt. Baker is also considering a spin-off of his HBC properties into a real estate investment trust.

In the third quarter, the $7 billion HBC narrowed its loss to 13 million Canadian dollars, or $11.4 million, in the quarter from 125 million Canadian, or $109.2 million, in the 2013 period. Earnings before interest, taxes, depreciation and amortization, on a normalized basis, rose to 116 million Canadian dollars, or $101 million, compared to 63 million Canadian dollars, or $55 million a year ago.

Same-store sales during the quarter at the department store group increased 1.7 percent. Saks’ same-store sales rose 1 percent. Saks Off 5th saw same-store sales increase 19.2 percent. Lord & Taylor was a drag on sales at the department store group, but Storch said that at the group, “I believe that the team has done a great job. There are always strong points and less strong areas. If you look at the results, they’re pretty good. There are many additional opportunities. One of the greatest is to continue to expand the digital business by building up the omnichannel paradigm.”

Storch said that the department store format, “once given up as an old-fashioned business, is now cutting edge” due to the rise of omnichannel services and initiatives. Going forward, Storch said he sees HBC “strengthening the connection between our store and digital businesses, expanding the outlet channel and investing in the store base” as key strategies.

Storch started his 30-plus-year career as a college student working in the bargain basement of a May Department Stores Co. location in Jacksonville, Fla., selling men’s and women’s shoes. “You really learn retail when you sell women’s shoes,” he said.

For the last two years, he has been chairman and ceo of Storch Advisors. Before that, he was chairman and ceo of Toys ‘R’ Us from 2006 to 2013, which he grew into a $13 billion global retailer and expanded the company’s e-commerce to more than $1 billion, according to HBC. He also drove growth in China and other parts of the world and led the acquisitions of FAO Schwarz, eToys and KB Toys. However, late in his tenure there, a slumping toy sector led to aborted plans for an initial public offering.

Earlier, Storch was vice chairman of Target, where he started, Target’s grocery business and oversaw Target Financial Services credit card business. He also oversaw Marshall Field’s, which was sold to May Co. under his watch, and led Target’s corporate strategy function for more than a decade. Before Target, he was a principal at McKinsey & Co.

For the past year, Storch, on a consulting basis, has been working with Baker on growing Saks Off 5th, geographically and in terms of merchandise presentation. HBC executives see much room for growth at Off 5th, which at about $500 million in sales is one quarter the size of the Nordstrom Rack outlet chain.

“Jerry brings to us tremendous capabilities on both the operating front and the digital frontier as well as being a world-class strategist and being responsible for many rollouts and developments at Toys ‘R’ Us and Target over the years,” Baker said. “The opportunity to have Jerry work with us is a big win. I have spent a tremendous amount of time over the last year working with Jerry. When we acquired Saks, we brought Jerry and his consulting team in to help us reposition Saks Off 5th over the last year. There’s been fantastic growth in the business.

“I’m particularly impressed with his ability to work with the team, coach the team and create a plan to execute,” Baker said.

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