The Hudson’s Bay Company has struck a deal to acquire US-based luxury retail chain Neiman Marcus, as first reported in the Wall Street Journal. The $2.65 billion deal involves Amazon becoming a minority shareholder in the newly formed Saks Global division, which will operate in the US while its Canadian Saks operations with three stores remain uncertain. It’s not known if Neiman Marcus could enter the Canadian market with the deal and it’s also not yet known what might happen, if anything, with HBC’s Hudson’s Bay department store chain in Canada.
Merger negotiations with Saks and Neimans have been ongoing for months according to the Wall Street Journal — Retail Insider was also being told last year that there were talks for HBC to take over Neiman Marcus under the direction of Governor Richard Baker, who was raising funds at the time. The deal to acquire Neiman Marcus could be approved by boards as soon as Wednesday evening, according to the Wall Street Journal article.
About US $2 billion was raised from existing investors for the deal, including Baker’s private equity firm NRDC Equity Partners, as well as Rhône Capital and the Abu Dhabi Investment Council. About US $1.15 billion in debt financing is being provided by Apollo Global Management.
Amazon will be a minority shareholder and will provide Saks Global with technology and logistical expertise along with Salesforce, also a new minority shareholder, which will work with the company on new AI initiatives.
Marc Metrick, currently head of e-commerce at Saks, will run the combined companies according to the Wall Street Journal. Saks Global will have about US $10 billion in annual sales, with distribution of some of the world’s top luxury brands.
The Hudson’s Bay Company acquired Saks Fifth Avenue in 2013 and made plans to open about 10 Saks stores in Canada. Saks opened its first Canadian store in downtown Toronto in February of 2016. A second Toronto store opened a week later at CF Sherway Gardens, and in February of 2018 Saks opened its third Canadian store at CF Chinook Centre in Calgary.
Saks had announced in 2016 that it would open a 220,000 square foot store in Montreal in the Hudson’s Bay building, and plans were subsequently shelved along with plans for a downtown Vancouver store. Saks could have entered the Edmonton and Ottawa markets as well before its expansion was halted.
The future of Saks’ three Canadian stores is currently uncertain — product is particularly sparse in the Calgary CF Chinook Centre and Toronto CF Sherway Gardens Saks locations which have also been downsized since their openings, while luxury brand concessions have exited the downtown Toronto flagship Saks store that is integrated into the downtown Hudson’s Bay building.
It’s not known if Neiman Marcus could enter the Canadian market as part of the announced deal — the Hudson’s Bay Company’s operations include offices in New York City, and so far there’s been no overt mention of an expansion of Neiman Marcus into Canada. However before the pandemic, sources told Retail Insider that there was a possibility of Neiman Marcus coming to Canada, including a store at Burrard and Georgia streets in downtown Vancouver in a new development.
Retail expert Liza Amlani of of Retail Strategy Group pointed out in a brief interview on Wednesday that now that Neiman Marcus has shifted its focus to top spenders, a Canadian expansion is less likely given our small population and the dominance of such retailers as Holt Renfrew, which stocks many of the same brands found at Neiman Marcus.
David Ian Gray, Principal at consultancy DIG360, said that Hudson Bay’s Canadian stores could suffer with the deal after already being neglected — over the past year, vendors have complained about not being paid while escalators have been down in many stores where music is also no longer being played.
“A bold move during some dog days in retail, this is an opportune investment to target those wealthy Americans protected from economic headwinds while gaining better buying clout with brands in the luxury space. That said, I still question the appeal of the department store model and, as a Canadian, I can only feel this further takes the leadership away from any creative play to keep Hudson Bay alive long term. While this deal is largely funded via partners, it will take time and attention of the combined senior team.”
Gray also noted the uniqueness of the overall deal including its Amazon and Salesforce partnerships.
“Notable is the equity involvement of Amazon and Salesforce. The former is interested in luxury and this will give it a passenger seat view. Amazon’s continued interest in stores is the best evidence to counter any lingering ‘death of retail’ sentiment. The Salesforce role reinforces my belief that modern retail is a technology play at the core,” Gray said.
Retail expert George Minakakis, Founder and CEO of Inception Retail Group, questioned the future of the department store in North America as well as prioritize of HBC as the company grows.
“Where do elephants go to die? In this case, the elephants are department stores. Many great brands have aged in place with little innovation and creativity to compel consumers to shop or be attracted to them. Unfortunately, they don’t stand the test of time. Survival now comes through consolidation, where supposed synergies, both financial and operational, need to be realized. However, that does not always work.”
“Hudson Bay is a classic example of being lost in the shuffle when too many retail brands are in a portfolio as complex as department stores with so many moving parts, and fashion and future aspirations were once the appeal. Not anymore. They now go where they will one day be forgotten and meet their end-brand game.”
Neiman Marcus filed for bankruptcy protection in 2020 during the pandemic, and closed some stores. Neiman Marcus currently operates 36 large-format stores, two Bergdorf Goodman stores in New York City (separate men’s and women’s) and five Last Call off-price stores. Saks Fifth Avenue operates 39 stores — in the US, eight malls have both a Saks and Neiman Marcus store, according to the article. Saks also has a separate e-commerce division that was created during the pandemic.
We’ll follow up on this story if there is any more news relevant to the Canadian market.
