Big Deal on Fifth: Hudson’s Bay Purchases Saks

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Nov. 4 (Bloomberg) –- Hudson’s Bay Chairman and CEO Richard Baker discusses the future of Saks and his outlook for holiday sales. He speaks with Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Reasons we made this transaction.

The first was our ability to grow in canada.

The hudson bay company is the iconic canadian partner, with incredible infrastructure, the plan was to open.

Or is in canada through the hudson bay infrastructure and to rollout from the saks office stores in canada and to have really a phenomenal online business in canada as well.

The second reason was the back of house energies.

100 million dollars per year in synergy between these organizations, bigger is better in today's world.

You cannot make these brands bigger.

Lord and taylor is this precious northeastern brand, hudson bay only has a finite amount of space in canada to expand.

You cannot get bigger by growing the brands, but you can get bigger by growing the brands together in the back of house synergy advantage.

That is a $100 million savings each year.

What does that do for earnings?

In percentage terms?

I do not want to give you the specific information, but analysts are making their own assumption.

We know we have a $100 million per year savings that will go right to the bottom line.

Additionally with real estate, the tremendous portfolio that we have between hudson bay, canada, lord and taylor, and saks, the ground lease for real estate has the ability to do a reach.

We can sell small pieces off to the public and maintain the balance on our books, creating a tracking stock so that the investors in the business can do a sum of their parts acquisition, seeing on a day to day basis what it is.

The parent company, if in theory some of the money is going off, might that change the cash flow to the parents?

Theoretically it could, but remember that we are now bringing in a lot of cash flow that will pay it down.

We will put all the real estate in and sell a piece of it, bringing cash from the sale to help pay down the debt.

Less that is operating.

The analyst at citibank says that this flagship store is worth $505 million.

You name three reasons, how much of the appeal is actually real estate?

They have an unbelievable global brand.

We think the opportunity to drive sales out of this that will never end, our top 10 doors, our entire chain, we think there is a huge opportunity.

Tourists, when they come to new york or miami, they want to visit a saks store.

The residents in the community want luxury, they think of saks.

We think that there is a lot more juice to squeeze, so to speak, within our existing store . on top of that, it was like a gift with purchase.

Real estate under that business, primarily this fifth avenue building is tremendously valuable.

Holidays, you have the decorations on the first floor, what is your outlook?

We are optimistic about the holidays.

We are keeping ourselves cautiously optimistic, because in our business we have to be.

The government, we do not know what they are going to do on a given day.

The consumer, we think, will act appropriately and continue their march forward as they feel more comfortable with their jobs and the economy around their particular lives.

We are cautiously optimistic.

Likes inventory lower than in years past?

I think it is under control.

We want to selloff the full cart.

I think we have lots of inventory so that our customer will see the full assortment and be able to find all their needs when they come shopping with us, but i think that they are running lean enough that we can be efficient and profitable, no matter how the sales season goes . you talk about the synergy on this thing?

$100 million, and the income,

This text has been automatically generated. It may not be 100% accurate.


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