Saks's Parent Company Will Open Up to 40 Off 5th Stores in Europe Next Year

As sales at the U.S. department store fall, owner Hudson's Bay Company is focusing on its off-price businesses and international expansion.
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A rendering of the new Gilt shop in Off 5th in Manhattan. Photo: Saks 5th Avenue

A rendering of the new Gilt shop in Off 5th in Manhattan. Photo: Saks 5th Avenue

Like most U.S. department stores, Saks Fifth Avenue isn't doing so hot right now. In its latest earnings report, the retail chain's Canada-based parent company Hudson's Bay announced that Saks's sales declined 1.2 percent in the fourth quarter of fiscal 2015, and 1 percent for the full year. The company mentioned weakness in the women's ready-to-wear category specifically, meaning newish fashion director Roopal Patel has her work cut out for her.

However, in the grand scheme of things, that wasn't a huge hit for Hudson's Bay, which also owns Saks Off Fifth, Lord & Taylor and the namesake Hudson's Bay. It also recently purchased German department store chain Galeria, which contributed to a 70.4 percent increase in consolidated sales in the fourth quarter to $4.5 billion.

As usual, Off 5th performed better than full-priced Saks, with sales there up 6.3 percent for the year. Thus, Hudson's Bay has big plans for that business, including opening 32 more stores in 2016, compared to only seven Saks Fifth Avenue stores — which is still more than one might expect for a business with declining sales. HBC is also figuring out how it can utilize flash sales site Gilt, which it acquired in February, to advance its off-price business across all channels (brick-and-mortar and online). In March, it installed a physical Gilt shop inside of an Off 5th store in Manhattan, for instance, and executives emphasized during Tuesday morning's call with investors their desire to leverage Gilt's expertise in personalization and mobile across all of HBC's retailers.

HBC also considers its acquisition of Galeria an entrée to the European market, where it apparently sees a big opportunity for Off 5th, announcing plans to open up to 40 of them in Germany in 2017.