Saks Fifth Avenue to Continue Expansion Under New Canadian Direction

Saks Fifth Avenue will continue with its plans to open multiple Canadian locations, under new leadership. Last week, Saks replaced Marigay McKee with a new President, Marc Metrick. Mr. Metrick will report to Hudson’s Bay Company (HBC) CEO Jerry Storch, providing Canadian direction for the New York City-based luxury department store. Sources say that Saks’ strategy could change slightly now that it is under new management, and we spoke with a retail expert and some vendors to learn more. 

HBC’s CEO, Mr. Storch, says that he still sees room for as many as seven full-priced Saks Fifth Avenue locations in Canada, as well as up to 25 locations for its discount Saks Off 5th. Two Saks Fifth Avenue locations are currently under construction, and negotiations continue for other free-standing stores. The chain’s Canadian flagship, spanning 150,000 square feet over four floors within Toronto’s flagship Hudson’s Bay building, is scheduled to open in the spring of 2016. A second 132,000 square foot location, at Toronto’s Sherway Gardens, is also scheduled to open in the spring of 2016. Both stores will be unique in how they will feature large grocery departments, each approximately 25,000 square feet, unlike in Saks’ American locations. 

Mr. Storch says that HBC will continue taking the chain more upscale, as Saks looks to position itself as North America’s premium department store brand. Sources we’ve spoken with also indicate that Saks will carry a variety of moderately-priced fashion brands, possibly more so than first intended. Several vendors, speaking on the condition of anonymity, say that Saks has approached them with the message that Saks will carry fashion brands at pricepoints comparable to both Holt Renfrew and Nordstrom. Seattle-based Nordstrom plans to open between seven and 10 Canadian stores, with locations already open in Calgary and Ottawa. Nordstrom will open its first Vancouver location this September and in 2016-2017, it will open three Toronto locations. Two of Toronto’s Nordstrom stores will be located in the same malls as Saks. 

Sources say that Holt Renfrew, as well, has planned an assault against Saks. Holt’s seeks to keep its top brands by offering them expanded spaces within Holt Renfrew’s top stores. Sources say that two popular luxury brands will see large ground level boutiques with streetfront entrances at Holt’s Bloor Street flagship in Toronto, for example, with similar treatment for the Dunsmuir Street side of Holt’s Vancouver location. Holt’s will also expand its customer service component, having recently launched a new loyalty program as well as expanded personal shopping suites and, soon, an even greater focus on concierge and other services. The Toronto-based luxury retailer also plans to expand and renovate its store base at a cost of about $300 million, expanding square footage by about 40%. 

Sources say that Saks continues to speak to mall landlords to open locations in Canada. As many as two Vancouver-area Saks stores could eventually open, possibly both in suburban shopping centres. As well, speculation persists that Saks could open in Cadillac Fairview-owned Carrefour Laval in suburban Montreal, given Saks’ close relationship with the mall’s landlord. Some speculate that Cadillac Fairview could also buy Target’s 115,500 square foot Chinook Centre location in Calgary, possibly converting it to a Saks while creating a luxury area around it. Chinook Centre is also home to Canada’s first Nordstrom, which opened in September of 2014.

We spoke with retail industry expert Farla Efros, COO and luxury retail expert at HRC Advisory, to get her opinion on Saks’ plans for Canada. She indicated that she feels strongly that Mr. Metric’s leadership will be advantageous for both the Saks and Hudson’s Bay brands. Specifically, both retailers will benefit from lack of potential cannibalization by being under HBC leadership, while at the same time each brand will be able to differentiate through branding and positioning. Overall, she says that new leadership will steer Saks’ Canadian endeavours in the right direction. 

Saks also continues to negotiate with landlords for new Canadian Saks Off 5th locations. Saks’ discount division will open its first Canadian location this spring in Ottawa (according to Tanger Outlet’s website), with a goal to operate as many as 25 stores in this country. Saks will significantly expand its highly profitable Off 5th division in the United States as well, growing from its current 77 locations to an estimated 200 over the next several years. 

Ms. Efros added that Canada is prime for the off-price business and if Off 5th’s U.S. results are any indication, its Canadian operations could be very successful. Canada is currently underserved by such retailers, though Nordstrom Rack plans to open as many as 20 Canadian locations, beginning in 2017. Ms. Efros also noted that both high-end and lower-end retail continue to thrive, while mid-priced retailers increasingly struggle. As a result, Saks’ addressing both luxury-spending and value-seeking Canadian shoppers could see tremendous success, likely at the expense of its competition. If Ms Efros is correct, HBC’s purchase of Saks Fifth Avenue could help facilitate tremendous growth for the company over the next several years.

Today’s Retail News From Around The Web: April 9, 2015