Iconic New York department store offloaded for $2.7b
No one is snickering any more. On Monday, Mr Baker's Hudson's Bay Co announced that it had agreed to buy Saks, one of the oldest and most revered names in luxury retailing, for $US2.4 billion ($2.7 billion).
The acquisition would create a retail behemoth and cap an extraordinary run of deal making by Baker. The combined company would own 320 locations, 179 of which are full department stores. It had combined revenues of about $US7 billion in the 2012 fiscal year.
Mr Baker has largely avoided the follies of other investors who have got into the retail business. He brought in experienced managers (including a handful formerly of Saks), invested in store makeovers and left most of the merchandising decisions to merchants.
Mr Baker's bid for Saks prevailed over a number of other suitors. Among those who explored a deal were Kohlberg Kravis Roberts and the Qatar Investment Authority, a sovereign wealth fund of the Middle Eastern emirate.
While industry experts once questioned whether department stores would stay relevant, with online competition, analysts said Saks' prime locations, like Fifth Avenue in New York, held up well.
"No tourist wakes up in New York and says: 'You know what I'm going to do now? I'm going to log on to the internet and shop'," said Faye Landes, a retail analyst at Cowen.
Frequently Asked Questions about this Article…
Hudson's Bay Co agreed to buy Saks for US$2.4 billion (about $2.7 billion). The deal was described as creating a retail behemoth combining Saks with Hudson's Bay and other assets.
The combined company would own 320 locations, 179 of which are full department stores, and had combined revenues of about US$7 billion in the 2012 fiscal year, according to the article.
Richard Baker is the US real estate scion who runs Hudson's Bay Co. He previously bought Lord & Taylor at the market peak in 2006 and has since built a track record of deal‑making; the purchase of Saks was presented as the capstone of that run and surprised earlier skeptics.
Baker brought in experienced managers (including some formerly of Saks), invested in store makeovers, and generally left merchandising decisions to merchants—steps the article credits with helping him avoid mistakes other investors made in retail.
Yes. The article says Baker's bid prevailed over a number of suitors, and specifically notes that Kohlberg Kravis Roberts (KKR) and the Qatar Investment Authority explored a deal.
While analysts once questioned whether department stores would stay relevant amid online competition, the article notes that Saks' prime locations—like its Fifth Avenue store in New York—have held up well. A retail analyst quoted in the piece said tourists tend to shop in person rather than online, supporting the value of flagship locations.
The article suggests a few investor takeaways: scale matters (the combined company is large), experienced management and store investments can help traditional retailers, and prime real‑estate locations can provide resilience versus online rivals. At the same time, analysts have long warned about online competition, so location and management strategy are key themes to watch.
According to analysts cited in the article, prime retail locations hold up well against online competition because they attract tourists and in‑person shoppers. That foot traffic and prestige can help preserve sales and brand value, making such locations important for investors assessing department store assets.
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