NEW YORK (AP) — Don’t let the global economy fool you: Luxury is hardly dead.
Saks Inc. agreed to sell itself to Hudson’s Bay Co., the Canadian parent of upscale retailer Lord & Taylor, for about $2.4 billion in a deal that will bring luxury to more North American locales.
The acquisition combines three department-store brands — Hudson’s Bay, Lord & Taylor and Saks Fifth Avenue — and creates a North American upscale retailing behemoth with 320 stores in some of the biggest and most populous cities in the U.S. and Canada.
Saks operates stores in the Cincinnati and Columbus areas.
Lord & Taylor and Hudson’s Bay, Canadian’s biggest department store chain, both cater to well-heeled shoppers who can afford $98 Free People blouses and $250 Coach handbags but aspire to buy more luxury brands that they can’t necessarily afford yet. Saks customers, on the other hand, are more affluent and can shell out $800 for Christian Louboutin heels or a couple of thousand dollars for Gucci handbags.
During a conference call with investors on Monday, Hudson’s Bay Chairman and CEO Richard Baker, said that the goal is to bring up to seven Saks Fifth Avenue stores and 25 Off Fifth outlet stores to Canada, while creating a Saks website targeted to Canadians. Hudson’s Bay also plans to renovate Saks stores and to make the brand more “luxurious.”
Hudson’s Bay is making a play for luxury at a time when shoppers still appear to be willing to shell out money for posh handbags and expensive sports cars despite global economic challenges. It’s expected that global luxury sales rose 10 percent to $281.96 billion last year, according to the latest study from Bain & Co. In North American, it’s expected that luxury sales were up 12 percent to $81.33 billion.
Still, Saks has lagged behind its peers in the luxury sector. It’s been trying to keep up with its rivals Neiman Marcus and Nordstrom, which have performed well post-recession.
Hudson’s Bay will pay $16 per share for Saks, a 5 percent premium over the company’s Friday closing price of $15.31.
Saks’ stock jumped nearly 4 percent, or 56 cents to $15.88 in Monday trading. Shares are up 46 percent for the year to date.
The companies put the deal’s total value at about $2.9 billion including debt. FactSet says the New York-based retailer has about 150.2 million outstanding shares.
Saks will continue to run as a separate company under Hudson’s Bay and will have its own merchandising, marketing and store operations employees. Key management personnel are expected to remain with the company. But it wasn’t clear whether Sadove would be staying on.