It’s been only five days since it went private and Hudson’s Bay Co. is transforming fast.
The chief executive officer is leaving Friday. The Toronto-based HBC is decentralizing so its three divisions — Saks Fifth Avenue, Saks Off 5th and Hudson’s Bay — operate more autonomously. Plans to integrate Barneys New York into Saks Fifth Avenue are advancing. And a campaign re-branding the Hudson’s Bay division in Canada launches today.
Additionally, the former Barneys flagship at 9570 Wilshire Boulevard in Beverly Hills will be converted into a new Saks Fifth Avenue women’s and men’s store, while the existing Saks flagship at 9600 Wilshire, composed of separate but connected men’s and women’s stores, will close and be redeveloped into a yet-to-be-determined use, WWD has learned.
On Wilshire Boulevard, Saks is adjacent to Barneys. “Saks is going to consolidate women’s and men’s into the Barneys store. Barneys will become a perfectly brand new Saks Fifth Avenue store, and there won’t be any loss of business,” during the project, a source close to HBC said.
The source also said the two sites are similar in size at about 150,000 square feet each. “The old Barneys building is a better building. It has a much better configuration and the entire strip on Wilshire will become more activated with additional uses,” said the source.
HBC will lease the former Barneys site on Wilshire and continue to own the Saks real estate. HBC could re-tenant the Saks property or sell it. “HBC could make a killing on that, either way,” said one retail source. Neiman Marcus also has a store at 9700 Wilshire.
HBC has the rights to the Barneys name, in the aftermath of Barneys getting lifted out of bankruptcy by Authentic Brands Group and liquidated by B. Riley. According to a source, Saks is paying ABG roughly $120 million over a 10-year period for the Barneys rights, though there could be fluctuations in the price based on how much business Barneys generates for Saks. HBC would not confirm the figure.
Saks Fifth Avenue recently started operating a Barneys @ Saks shop on saksfifthavenue.com.
HBC also plans to to re-brand its Saks’ contemporary business, currently called The Collective, to Barneys. It would be a low-cost maneuver to cast a brighter light on contemporary fashion at Saks, potentially lifting the business. A Barneys identity could resonate more with customers than The Collective has done.
ABG has said it would open 40 Barneys shops at Saks Fifth Avenue locations. One would be on the fifth floor of Saks’ Manhattan flagship, where there’s a 36,268-square-foot Collective with a boutique-y feel and lots of mixing brands in the same vignettes to “collectively” depict a trend or a color palette, display outfits composed of a few labels, and lean into looks and lifestyles rather than spotlighting designer labels.
In luxury retailing, it’s customary to brand the contemporary department. Bergdorf Goodman has “5F,” Neiman Marcus previously labeled contemporary as “Cusp,” and at Barneys, contemporary was identified as Co-op. Saks’ contemporary floor could be called Barneys at Saks, or Barneys Co-op at Saks.
To pull off the re-branding, heavy lifting isn’t required — perhaps a new logo, new shopping bags, social media and uniforms for sales associates — to cast a Barneys identity within Saks. Barneys’ private label could be sold at Saks; it has been high-quality and popular, particularly in men’s and often sourced from top mills and tanneries.
At the corporate level, HBC, which generates about 9 billion in Canadian dollars annually, is decentralizing to cut costs and enable the individual divisions to operate more autonomously. Certain functions such as marketing, public relations, creative services, strategy, project management and loyalty have been returned to the divisions, in effect dismantling the centralized structure created under the former HBC ceo, Gerald Storch.
“Basically, Saks will be like one company, run by itself. Hudson’s Bay will be run by itself,” said the source close to the company. “HBC is shrinking its infrastructure. It doesn’t need teams of people in the middle,” said the source, adding that HBC will become more like a holding company.
A clear sign of that emerged Tuesday when HBC disclosed that its ceo Helena Foulkes will leave the company on March 13. She is not being replaced, though Richard Baker, HBC’s executive director, is assuming the title of ceo. Additional personnel cuts are expected, according to sources.
Over the last few years, HBC has downsized greatly by selling off its retail and real estate assets in Europe, selling the Lord & Taylor retail operations to Le Tote, selling the Lord & Taylor flagship building on Fifth Avenue to WeWork, and selling Gilt Groupe to Rue La La.
The sell-offs, designed to cut debt and enable the company to shore up its under-performing retail operations, have raised speculation that HBC would ultimately sell off all of its remaining retail assets, except that Baker has not given up on his vision to create a luxury powerhouse in North America by bringing the Neiman Marcus Group into the HBC portfolio, through either an acquisition or a merger. HBC would dominate the luxury market in North America by controlling Saks, Neiman Marcus and Bergdorf Goodman. Talks between the owners of both companies have been on and off for years and are believed to have recently picked up.
HBC went private last week by paying 11 Canadian dollars per common share to shareholders. The stock was delisted from the Toronto Stock Exchange on Wednesday and the company is now controlled by Baker and a group of other key continuing stakeholders — Rhône Capital LLC; WeWork Property Advisors; Hanover Investments (Luxembourg) S.A., and Abrams Capital Management LP. The cash for the go-private deal was largely raised through the sale of Hudson’s Bay retail and real estate holdings in Germany.
By going private, HBC no longer has to worry about short-term performance to appease financial markets and can expedite changes geared to improve the business for the long term.
In other near-term plans, HBC continues to elevate the image and luxury appeal of Saks Fifth Avenue, completing the final stages of the $250 million-plus renovation of the Saks flagship, and striving to make Saks Off 5th into a “scrappier” player in the robust and highly competitive off-price sector. Former Nordstrom executive Paige Thomas was named Off 5th president in February, succeeding Marc Metrick, who for the past two years wore two hats at HBC, as president of Saks Fifth Avenue and president of Saks Off 5th. He remains president of Saks.
Off 5th’s business model is shifting toward buying opportunistically and more frequently in the market, rather than planning and buying for two main seasons, spring and fall. That’s resulting in higher inventory turns and merchandise freshness. Recently, 15 stores closed, bringing the count down to 114. Among off-pricers, that’s a small portfolio, suggesting room to revisit store openings, though none have been announced. The $1 billion Off 5th is tweaking the proportion of clearance merchandise from Saks Fifth Avenue versus merchandise bought specifically for Off 5th, which may bear a designer label yet isn’t of comparable quality or price of what’s seen in Saks Fifth Avenue.
In Canada, Hudson’s Bay’s new branding campaign, “Live a Colourful Life,” will be on television, in cinemas and on social and digital platforms. Created in conjunction with the BBDO agency, it also celebrates Hudson’s Bay’s 350th anniversary. “Showing Canadians that we understand what matters to them today, and reinforcing our connection, is at the core of our new strategy and creative platform,” said Allison Litzinger, vice president of marketing, brand, customer and loyalty.
“More cultural intervention than traditional campaign, our ‘Live a Colourful Life’ platform is a call to action to live a life filled with rich, meaningful and diverse experiences,” added Daniel Koppenol, vice president and creative director. The campaign “centers around the idea that you never quite know something until you feel it. It might be the feel of a fabric, the weight of a glass, or the embrace of a loved one. Feeling gives life color.”
The 89-unit Hudson’s Bay division has been overhauling and upgrading its merchandise mix and last month named Iain Nairn, president. He was ceo of kikki.K, a Swedish design and stationery business and earlier, ceo of David Jones, the Australian department store.
As a private company, HBC will no longer publicly disclose its quarterly results.
In the third quarter, sales tallied 1.82 billion Canadian dollars, down from 1.86 billion Canadian dollars a year ago, with a 1.7 percent comparable sales decrease. Earnings before interest, taxes, depreciation and amortization declined to 40 million Canadian dollars from 84 million Canadian dollars a year earlier. At the end of the quarter, HBC had $2.8 billion of outstanding debt and $1.1 billion in cash.
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