Will the Canadians Put the Ax to Saks?

Expert says leave venerable department store alone

If there’s one thing devoted shoppers of a hallowed retail chain fear more than a store closing its doors it is a big corporate buyout.

Perhaps you will recall how, in 1999, Vermonters railed against Unilever’s plans to buy Ben & Jerry’s, culminating in the grassroots campaign "Save Ben & Jerry's." Or how Kiehl’s devotees treated the brand’s 2000 acquisition by L’Oréal as something akin to a wake. So what should shoppers make of today’s news that Saks Fifth Avenue, a New York retail institution since 1924, will become part of Hudson’s Bay, the grizzly of Canadian retail, which also owns Lord & Taylor? Are the days numbered for those famous Fifth Avenue holiday windows? Will Crocs take the place of those $500 suede Gucci loafers?

Truth be told, probably not.

According to NPD retail analyst Marshal Cohen, the $2.9 billion acquisition will probably yield more advantages than disadvantages for the venerable department store and its hordes of well-heeled shoppers—not only by affording the parent company better economies of scale but also by permitting it to assess which of its brands are the best fit in an expanded portfolio of locations, which just jumped to 320.

“Things are going to change,” Cohen said, “but this merger will give Hudson's new power in the marketplace—the ability to expand instantly and to decide which nameplate fits which locations.”

While Hudson’s Bay has publicly stated that it hopes to realize economies of scale amounting to $97.3 million in the first three years, “they won’t be changing things for change’s sake,” Cohen wagered. “They’ll be very calculated.”

They had better be. Even eight years later, the smothering takeover of Chicago’s legendary Marshall Field’s by Macy’s still casts a cautionary shadow over the retail landscape. When the mother of all department stores blew into the Windy City in 2005 and decided to retire the Marshall Field’s nameplate, Chicagoans boycotted. That incident demonstrated that a new owner would be well advised to take local tastes, customs and preferences into account before throwing its weight around. In the current buyout, Cohen said, Hudson’s Bay “has this history behind them”—meaning the Macy’s debacle—“proving that instant change doesn’t work.”

In fact, Hudson’s has hinted that it might move in the opposite direction—not only leaving the venerable Saks brand name intact but moving into new markets. Because Canada is already Saks’ largest ship-to market, it might make sense to build physical stores there, for example.

“If they slowly took that marquee nameplate and tried to expand it, I wouldn’t be surprised,” Cohen said.

Though they might have to cut the price of those Gucci loafers.