When Andrea Sioufi was a teenager growing up in Brazil, no trip to New York was complete without a stop at the flagship location of Saks Fifth Avenue. Now Ms. Sioufi is in her 40s and lives in Istanbul. But the store still draws her back.
“I’ll always come,” said Ms. Sioufi on Monday afternoon as she browsed the offerings on the store’s ninth floor, which included furs for women and designer clothes for children. “I was just thinking of bringing my daughter to show her it all.”
With its purchase of Saks Inc., Hudson’s Bay Co. is picking up a storied American brand with an international following and a reputation for luxury retailing that goes back nearly a century.
In more recent years, Saks has battled to recover from the recession, closing unprofitable stores and shedding staff. It reported $3.1-billion (U.S.) in revenue in the year to Feb. 2 – still short of the level that prevailed prior to the downturn – and $62-million in profits.
In the U.S., Saks sits near the top of the department-store pyramid.
“They’re the highest-end, the highest price point,” said Paul Swinand, a retail analyst at Morningstar Inc. “If you’re a junior analyst on Wall Street and you have a bad bonus year, you can’t afford to shop at Saks.”
Mr. Swinand credits the current management team, led by chief executive Stephen Sadove, for improving the company’s financial performance and embracing online sales, even if profits have fallen lately. He noted that Saks is in contraction mode, with 41 stores in the U.S., down from more than 50 before the recession (the company also has 67 “Off Fifth” discount outlets).
Saks had considered a number of offers, said Walter Loeb, a veteran retail analyst who heads the consulting firm Loeb Associates in New York. “This particular bid is a fair bid,” he said. But, Mr. Loeb added, there is a big challenge ahead because not all of its U.S. locations are profitable.
Saks traces its roots back to a men’s clothing store founded by Andrew Saks, who started his business in Washington and later expanded to New York. In 1924, the company opened its flagship store on Fifth Avenue. In recent decades, it has shifted between different owners, which included a tobacco giant and a private-equity firm. It was publicly listed in 1996. Today Saks has locations in 22 states.
In May, Deborah Weinswig, a retail analyst at Citigroup Inc., estimated that Saks’ real estate holdings were worth $1.5-billion, with the New York flagship store accounting for more than $800-million of the total.
In New York, perhaps only one department store – Bergdorf Goodman – can claim to have a more exclusive clientele than Saks. The Saks location on Fifth Avenue is famous for featuring an entire city block’s worth of women’s shoes, a floor which, in a piece of marketing genius, managed to obtain its very own postal code (10022-SHOE).
Saks is the kind of place where, as on Monday afternoon, it’s normal to encounter women with the stork-like walk of fashion models or the abnormally smooth faces resulting from expensive plastic surgery. One shopper was trying on a designer belt worth hundreds of dollars as her three French bulldogs looked on, all of them wearing rhinestone collars.
Downstairs on the fragrant main floor, a salesperson spritzed a visitor with a scent made exclusively for Saks by a French perfume house (sweet pea, mandarin blossom, ylang-ylang). The salesperson had learned about the store’s new owner from news reports earlier in the day but wasn’t worried about any changes that might happen as a result. The flagship store would remain the same, she asserted.