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HBC should apply learnings from new Saks Global company to the Bay: experts

TORONTO — When Liza Amlani visited Hudson's Bay Co.'s flagship Toronto store last week, she was quickly taken aback by the scene.
A Hudson's Bay department store is shown at Sherway Gardens in Toronto on Thursday, March 9, 2023. THE CANADIAN PRESS/Nathan Denette

TORONTO — When Liza Amlani visited Hudson's Bay Co.'s flagship Toronto store last week, she was quickly taken aback by the scene.

"I did a walk-through just to see what was going on and crickets," the co-founder of the Retail Strategy Group said Friday.

"There were no people. There was excessive markdowns, rails and rails of product, which tells me that either the buying team (or) the planning team does not know what the Canadian customer is looking for."

Retail experts say figuring out how to appease shoppers and tackling the issues Amlani spotted are even more pressing for Canada's oldest business now that its parent company has inked a blockbuster deal that will unite several department stores.

Hudson's Bay announced Thursday that it had reached an agreement to buy rival Neiman Marcus Group, which owns 36 self-titled department stores and two Bergdorf Goodman locations.

Should the deal snag all the necessary approvals, Hudson's Bay will combine its new purchases with Saks Fifth Avenue and Saks Off 5th, which it bought in 2013, calling the new firm Saks Global.

The Bay will be left out of the entity, but its parent company said the deal will recapitalize the brand and give it more liquidity.

While it makes sense not to include the brand in Saks Global, Lisa Hutcheson, a retail strategist with J.C. Williams Group, said the deal leaves the Bay "sitting on the sidelines."

"There is a chance that it will just be less of a focus for the business, and really focusing on this merger of Saks and Neiman Marcus," she said.

But the deal also leaves plenty of room to apply lessons from Saks to its Bay business, especially because the agreement brings two big tech names into the fold.

As part of the transaction, e-commerce goliath Amazon and software giant Salesforce will become investors in Saks Global.

All parties involved in the transaction have declined to share whether the companies will receive a stake in the business and Hudson's Bay did not immediately respond to a request for comment for this story.

Hutcheson thinks the parent company should see whatever processes Amazon and Salesforce bring to Saks Global as a potential model for the Bay.

"I think they'd be foolish not to take any learnings that they have," she said.

Amlani agreed. She imagines the deal will be a way for the Bay to learn more about how it can improve its supply chain, inventory management and e-commerce.

"When we look at retail today, let alone department stores, the way that they're run is in silos, it's very manual, there's a lack of trust in technology, so it takes a lot longer to connect the dots across an organization, especially one as big as a department store," said Amlani.

"This gives me some hope that we're going to come out of those Middle Ages and we're going to get into the future ... and technology is going to help retailers do that."

Time is of the essence because many have felt Hudson's Bay has been struggling for years now.

Before it went private in 2020, the company closed Home Outfitters and sold Lord & Taylor to fashion rental subscription company Le Tote Inc.

Amid the COVID-19 pandemic, it also closed some stores and laid off workers. By the time retailers were starting to recover, however, inflation and interest rates were soaring, weighing on consumer spending patterns.

While the luxury market many of Hudson's Bay brands play in is more immune to economic swings, the glory days of the department store model are long gone.

Neiman Marcus filed for bankruptcy protection in May 2020 but managed to survive. Rival Nordstrom left Canada last year, saying it did not "see a realistic path to profitability" in the country.

As for the Bay, Hutcheson said it used to be home to several brands you couldn't find anywhere else, but now many companies have opened their own stores.

"So there isn't that same need for (the department store)," she said.

If Hudson's Bay doesn't turn things around, Amlani feels the consequences could be extreme. She predicted the chain may have to close locations that are not profitable or introduce a smaller, localized format of stores.

"Today's department store has to change and I think that's something that everyone in the retail space can agree on," she said. "There has to be a shift in the way that we are tackling physical retail."

This report by The Canadian Press was first published July 5, 2024.

Tara Deschamps, The Canadian Press