Saturday, August 3, 2013

Sak's Coming to Winnipeg?

There had been rumbles about Hudson Bay Company taking over Sak's Fifth Avenue department store for months. Compared to HBC founded in 1670, Sak's is a relative newcomer started in 1867 and in its present department store form from 1924.

From the start Sak's represented luxury on a scale rarely seen. There have been bumps along the way such as The Depression and wars and business cycles up and down. The department store adapted expanded and extended their brand to other markets through stores and their discount luxury line over many years. The Off 5th stores started in 1990 and now outnumber the department stores. The online store was around from 2000.

Sak's has expanded under licence to Mexico and the Middle East.

The recession has hurt many businesses, especially retail but Sak's has a great name, great real estate and great product.

The savvy shopper in recent years has out pressure on company's like Sak's by shopping online and waiting for steep discounts or deals on shipping. This has marked many retailers the last years. best Buy has closed stores because too many people came in, tested the product, got an education in it and then went home and ordered it cheaper online.

The wait for sales has become a huge game and often retailers blink first.

Add to that the ridiculously low shipping costs subsidized by the U.S. government. The U.S. Postal Service loses $25 million a day every day. If the U.S. wanted to see more people go back to stores, they would stop the post office from losing money and raise stamp prices.

In Canada, HBC has fared a lot better in its turn around with new ownership in the form of Richard Baker from the U.S. and his investment finance group. The group had previously bought the prestigious U.S. retailer Lord and Taylor in the States. In both cases, the two department stores have done very well recovering.

In the case of the HBC, it has shed itself of Zellers, got a pocketful of cash from the stock market, signed some excellent deals with suppliers, upgraded their stores made some money.

The nearly $3 billion deal to buy Sak's is a very interesting play by HBC to face head on the challenge of Nordstrom's arrival sometime in 2014. It is also an indication they are prepared to challenge Holt Renfrew for supremacy of the luxury market in Canada. There is some indication that their plan is a sound one.

There are still some challenges from Sak's shareholders to be sure. Other companies might try to make a play for Sak's. It ain't over yet.

But if it does succeed, what will it mean for Winnipeg? Well mostly, Winnipeg would land maybe one or two Off 5th stores. HBC has indicated that they will put the Sak's discounter in 25 locations. To be sure, at least one will be in Winnipeg. Most of the discount stores are between 25,000 and 28,000 square feet on average. Could this part of HBC downtown and maybe a spot in Polo Park?

There is an indication that HBC might also open full Sak's stores in four of five markets. Most certainly Winnipeg stands a good chance of landing a store if they decide to do one 1 store per market. There is already word that some markets such as Ottawa might be too crowded for a store so Winnipeg might be good with no Nordstrom's coming and a more stripped down Holt Renfrew in place.

And where to place a Sak's? Well, the rumours all week have been the old Zellers location in Polo Park is excellent. Downtown is a possibility too in a building the company owns.

If HBC decides to become a Real Estate Investment Trust as they say they'd like to, it might unlock a complete redevelopment of HBC downtown. What this entails could be a complete demolition of the old parkade and construction of a new one with other mixed uses such as a hotel, offices and condos.

And let's not forget Seasons of Tuxedo. This is the type of store they want. Could be a Sak's or an Off 5th.

Unless the deal is scuttled though, bet on seeing a roll out of Off 5th in 2014 and Winnipeg will be included. As far as Sak's, we can hope. It will bring lots of competition if they do come.


The View from Seven said...

An Off 5th location is a possibility. If one were to open here, somewhere along the Route 90 corridor would be the most logical location. That would make the store accessible to River Heights and Tuxedo shoppers. (The company will probably be averse to going downtown, given the fate of previous upscale retailers in that part of town.)

A mainline Saks Fifth Avenue would find Winnipeg a challenging market in terms of getting customers to overcome sticker shock (e.g., $100-plus for a necktie) and a cultural aversion to ostentation outside of special occasions.

Anonymous said...

The name of the store is Saks. Not Sak's.