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Saks might be a 'crown jewel' for HBC

Linking luxury brands to the Internet

Prospective buyers of Saks Inc. will be happy to know it’s an undervalued “crown jewel,” according to retail analysts.

Hudson’s Bay Co. is reportedly considering purchasing the luxury department store company as the newest addition to the HBC/Lord & Taylor family. Saks has been at the centre of speculation since it announced its hiring of an investment bank in New York to help it pursue “strategic options” last month.

Saks occupies a unique position in the retail industry making it a prize acquisition, says Maxim Group analyst Rick Snyder.

“The retail world is moving to an omni-channel model,” said Snyder, which is a buzzword way of saying people are increasingly shopping online. Unlike mid-level brands, which might choose to circumvent a department store website and simply connect to their customer through their own website,  that “is not appealing to the luxury brand,” said Snyder. “They like limited distribution.”

Saks, with its far-reaching shipping services and reputation as a go-to luxury retailer, takes care of the expense and hassle of selling online so that brands like Gucci, Prada, and Valentino can focus on creating their products instead. Saks has also created a worldwide network to ship these brands to over 100 countries. It’s not likely that boutique brands will be taking on the task of online sales and shipping anytime soon, added Snyder, which gives Saks a special place in the department store market.

Saks shares went up on Monday after the HBC rumours were reported by Women’s Wear Daily and the Canadian Press. The Canadian Press reported that HBC is one of a number of potential buyers of the luxury retailer, and that a purchase would include the sale of the famed Saks location on New York’s Fifth Avenue.

Between its regular Saks stores and OFF 5th locations, the company has more than 100 stores in the U.S., and a market capitalization of over US$2 billion.

As of Tuesday, neither HBC nor Saks had made any public announcement regarding a possible transaction.

On Monday, an HBC spokesperson wrote in an email to Canadian Business that the company could not comment on the story at that time.