Richard Baker jumps out of his chauffeur-driven SUV in front of the Hudson’s Bay store at Bloor and Yonge Streets in Toronto. He takes one look at the concrete-encrusted building and deems it “ugly.” Baker, the majority owner of Hudson’s Bay Co. (HBC), suddenly produces an architect’s rendering of a revamp for the store. It shows the place sleekly redesigned, with a white façade and large sheets of glass at the front. And it prominently displays a new name: Saks Fifth Avenue.
“This will be the second-largest Saks in the world,” Baker proclaims with a wave of his hand. “Ground zero for luxury goods in Canada.” And with a nod to Holt Renfrew & Co., the country’s dominant luxury player—whose flagship stands guard a block to the west—he adds: “Did I say it will be double the size of Holt’s?”
Baker, you see, is not short on ambition. It’s a cold hard fact that department stores have been in decline for many years. But he sees potential where others see disaster.
A real estate tycoon by virtue of his family background, Baker caught the retail bug somewhere on the way to Fifth Avenue. During the boom times before the Great Recession, his private-equity firm bought up dusty retailers for their valuable real estate. In 2006, he acquired the U.S. chain Lord & Taylor for $1.2 billion (U.S.) and, two years later, HBC, for just a little more, most of it with debt, merging much of their backroom operations. Today those chains, two of the oldest names in North American retail, are showing signs of new life, thanks in part to Baker’s habit of hiring seasoned merchants to spearhead a transformation.
With HBC, Baker also got its discount chain, Zellers. His biggest coup in Canada is still in real estate: selling off most of Zellers’ leases to U.S. invader Target Corp. in 2011. The $1.8-billion transaction eliminated a headache for Baker: Zellers was not well. But the deal also turned the entire Canadian retailing scene on its head by paving the way for Target to set up shop in this country, putting pressure on incumbent chains—including Baker’s own Hudson’s Bay.
Now, with Saks, which he acquired for $2.4 billion (Canadian) in November, Baker is betting that there’s more of a luxury market in Canada than some experts suggest. Is he a visionary—or just someone with a lot of money who’s in over his head? To help find out, we spent a whirlwind day touring stores on both sides of the border with the unstoppable Richard Baker.
With youthful good looks, Baker, who just turned 48, speaks in exclamatory sentences—“This is unbelievable!” and “This is awesome!” Understatement is not his style. As we tour the Bay’s remodelled downtown Toronto flagship store on Queen Street, I realize he comes by a passion for retailing naturally, because he’s a passionate shopper himself. He regularly slips on samples of Hudson’s Bay’s own Black Brown 1826 menswear before they make it to the floor. Passing by a display of the jackets, he quickly takes off his own and models an army camouflage blazer ($250) and other items on the racks that he also has in his own wardrobe. “He loves clothes,” says Joseph Abboud, designer of Black Brown 1826.
The “governor” (chairman) and chief executive officer of HBC keeps a close eye on stores, his own and his rivals’, walking them weekly. At his own stores, he’s quick to call a manager with suggestions. Indeed, he’s constantly pulling out his iPhone from a slim, made-to-measure blue suit.
Baker heads to one of his latest tests: a display of “pre-owned” Rolex watches, at $2,000 to $10,000 a pop, half the original prices. (“I’m buying one for myself!”) He gets on the phone to ask the department manager about adding the original cost to the tag’s “pre-owned” price. “The natural question of customers is going to be: ‘What would that be if it were new?’ ” In the men’s section, as he tries on jackets, he mentions to the store manager that more mirrors are needed, including some placed low to afford shoe views.
Baker’s real estate savvy taught him a few tricks. In the revamp, only sections of the main floor were redone in white marble, leaving the dull beige in place elsewhere. “Hudson’s Bay is too big to renovate every square inch of it,” he says. “We carve pieces out—we make improvements that make the entire store look renovated. It’s pretty clever.”