Hudson's Bay makes serious commitment to stores and expansion

Dive Brief:

Hudson’s Bay Co. (HBC), parent company of Saks Off Fifth, Lord & Taylor, and Hudson's Bay, said this week that it will make significant investments in store renovations, technology, and a expansion of its Saks Off 5th stores. The company recently reported healthy Q4 profit and revenue thanks in part to real estate initiatives.
HBC said it will make some $750 million to $850 million in capital investments, with about 70% going to growth and 30% to maintenance. Tech investments will see 30% of that budget, including robot-based automation of the its Toronto distribution center and a new U.S.-based fulfillment center. And 40% will go to store remodels, including its Saks Fifth Avenue flagship in Manhattan.
Nearly a third (30%) will go toward launching seven new flagship Saks stores and 32 new Saks Off 5th off-price stores, which will be added to its existing 38 Saks Fifth Avenue stores and 90 Off 5th stores.

Dive Insight:

HBC, especially its Saks 5th Avenue operations, had a great year—an enviable position for a department store company these days. The company said Monday that Q4 consolidated sales rose 70.4% to $4.5 billion, with same-store sales up 1.8% on a constant currency basis.

While HBC's purchase of Saks three years ago caused a certain amount of head-scratching, the move has worked out well so far for the Canadian retail company. Its acquisition of German department store retailer Galeria, made with prime real estate in mind, and its acquisition of flash-sales company Gilt Groupe has also rounded out its portfolio; the company has folded Gilt into its Saks Off 5th operations, giving it a new channel for sales and a new way to move excess inventory.

While the Gilt purchase could boost HBC’s online sales, it’s also an important wedge to get shoppers heading to Saks and Saks Off 5th stores. The company plans to have Gilt “concept shops” within some Off 5th stores, and executives mentioned in its Tuesday call with investors that HBC will try to leverage Gilt's mobile and personalization expertise across all of its portfolio.

In a statement, Richard Baker, HBC’s governor and executive chairman, noted the impact of acquiring and selling off key real estate through its German-Belgian Galeria acquisition. Baker said that the company expects to grow its revenue by 50% thanks to the acquisition, and discussed plans to open 40 Off 5th stores in Germany in 2017.