The Hudson’s Bay Company‘s vice-chair Bonnie Brooks has announced that Saks Fifth Avenue will expand into Asia and Europe. The idea is lofty, and potentially dangerous for the retailer. If they can pull it off, however, Saks could become one of the world’s greatest global retailers.
Ms. Brooks says that she thinks Asia will be a growth market for Saks. She is no stranger to Asian luxury retailing: Before returning to Canada to modernize Hudson’s Bay, Ms. Brooks ran Hong Kong-based Lane Crawford, now one of the world’s most prestigious department stores.
Saks Fifth Avenue has built many stores in the United States, only to subsequently close them due to low sales. The company has considerable debts. Overseas shoppers may not be as receptive to a foreign department store. Saks already has, however, several international stores in the Middle East and Mexico, as well as a licensed 91,000 square foot store in Kazakhstan which opened last year. If it continues to expand, we don’t know if Saks would continue to license its name (as it has internationally) or take over control of its new and existing international stores.
Alternatively, if Saks can make it in Asia, it could become one of the world’s great international retailers. Given the limited growth of the American economy, international expansion might be a way to increase Saks’ revenues while avoiding home-based competition by retailers such as Neiman Marcus.
Ms. Brooks also mentioned the opening of Saks stores in Europe. One problem we see is Saks trying to secure 75,000-150,000+ square foot store spaces in cities with older, typically smaller buildings. One alternative would be for Saks to open in the suburbs of some larger European cities, though being regarded as a suburban store might harm Saks’ reputation on a continent where luxury shopping is still mostly confined to urban high streets.
Ms. Brooks discussed some of these details during her September 23rd speech at The Canadian Club in Montreal.