One of Baker’s first moves as Saks’ new owner will be to open seven stores in Canada and as many as 24 Off Fifth outlet stores. With a flagship Hudson’s Bay store at the south end of the Toronto Eaton Centre, Baker’s taking the Hudson’s Bay store four subway stops north of the Eaton Centre and converting into the second-largest Saks anywhere. Bloor Street is a popular luxury shopping district in Toronto, so a Saks location will do very well.
Shoes will be one of the biggest battlegrounds for all Canadian department stores in the years ahead. Nordstrom consistently generates almost a quarter of its revenue from shoes — its second-best category behind women’s apparel. Together, these two categories generated 54% of its overall revenue in fiscal 2012.
Fashion industry analyst Sandy Silva points out in Strauss’s article that mid-to-high-priced women’s footwear is underdeveloped in Canada. For this reason, women can expect to see much better shoe options in Canada over the next few years (which will make my wife very happy). Like retail in general in Canada, the arrival of American competition is forcing the Canadian mainstays to up their game. Whether or not they can is another matter altogether.
Headquartered in Seattle and only 140 miles south of Vancouver, Nordstrom already has a good idea about Canadian shopping habits. Something like 15,000 Canadians already have Nordstrom cards, so you can bet the company’s been using the data to figure out what Canadians want to buy in the stores come the fall of 2014.
Furthermore, JWN has been able to watch Target stumble badly in its first year operating stores in Canada and will certainly learn from Target’s mistakes. If you look at the drawings of its first five Canadian stores, you can tell Nordstrom isn’t planning to enter Canada on the cheap.
Both Holt Renfrew and Hudson’s Bay have deep pockets. But so do Nordstrom and Macy’s if they decide to enter the market. Canadian department stores haven’t been this talked about in years. That’s good for Canadians and better for Nordstrom.
I believe Target will ultimately get its problems sorted out north of the border, taking market share from other discount competitors, both Canadian and American. Nordstrom will likely follow a similar path taking 3-5 years before it becomes clear it made a smart decision. Long-term, I like the idea of owning JWN stock.
Holt Renfrew will take about the same amount of time to figure out it’s the loser in all of this brinksmanship for Canada’s high-end shopping dollars. The combination of Saks/Hudson’s Bay could possibly lose some market share to Nordstrom, but they’ll also pick some up from Holt Renfrew.
Overall, I think HBAYF will hold its own. I’d be less inclined to own HBAYF stock over JWN, but then again, Richard Baker seems to have a Midas touch when it comes to retail, so you never know.
As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.