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HBC-Saks: Can one icon give another the glow it needs?

Hudson’s Bay Co. CEO Richard Baker.

Fernando Morales/The Globe and Mail

It's an iconic department store with a storied past going back more than 300 years that has been struggling with an uncertain future.

Now, Hudson's Bay Co. – which recently reached back into its legacy by abandoning the streamlined HBC moniker – is betting on another iconic name, one associated with upscale fashion retailing, as part of its renewal strategy.

Hudson's Bay chief executive officer Richard Baker – a U.S. real estate entrepreneur who is relatively new to the tough and ever more competitive retail sector – is buying luxury New York-based chain Saks Inc. in a bold bid that confirms his faith in the aging department-store concept.

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Shares in Hudson's Bay have struggled ever since the company went public at $17 per share last November.

Mr. Baker has spearheaded a dynamic overhaul at the chain, whose roots go back to 1670 when King Charles II granted the initial investors – the Governor and company of Adventurers of England Trading into Hudson's Bay – a royal charter giving them a monopoly on trading in a vast territory.

He has refreshed the senior management ranks, cut costs, improved merchandising and productivity and placed a bigger accent on fashion.

But the stores across the country are still for the most part laggards in terms of sales per square foot. Meanwhile, the retailing landscape in Canada is getting even more crowded, with the recent incursion of Target Corp. and the looming arrival of U.S. upscale chain Nordstrom Inc.

Mr. Baker and his team are obviously hoping that Saks will bring some much needed glow, not only in the Canadian operations but also in the U.S., where Hudson's Bay operates the Lord & Taylor chain.

There is much work to do, however. Both Saks and L&T are somewhat underwhelming in terms of performance, on just about every front: sales, profitability and stock.

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