Canadians create luxury retail giant

Saks' flagship store on Fifth Ave, New York, sits on some of the most valuable real estate in the world. Photo / AP

Luxury retailer Saks has agreed to sell itself to Hudson's Bay Co, the Canadian parent of upscale retailer Lord & Taylor, for about US$2.4 billion.

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 United States and Canada.

Hudson's Bay chairman and chief executive Richard Baker said the goal was to bring Saks' luxury brand into Canada. The company plans to open up seven Saks Fifth Avenue stores and 25 Off Fifth outlet stores in Canada, while creating a Saks website targeted at Canadians. The parent company 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 willing to shell out money for posh handbags and clothing despite global economic challenges.

Global luxury sales, including higher-end jewellery and clothes, are estimated to have risen 10 per cent to US$281.96 billion last year. In North America, luxury sales were estimated to be up 12 per cent to US$81.33 billion.

Still, Saks has lagged behind its peers in the luxury sector. It has been trying to keep up with its rivals Neiman Marcus and Nordstrom, which have performed well since the recession.

Hudson's Bay will pay US$16 a share for Saks, a 5 per cent premium over the company's Saturday closing price of US$15.31.

The acquisition will marry two storied retailers. Hudson's Bay was founded in 1670 as a trading firm for furs and other goods. It is considered the oldest company in operation in North America.

Founded in 1924 by Horace Saks and Bernard Gimbel, Saks' flagship store on Fifth Ave in New York City is a landmark of retailing and sits on some of the most valuable real estate in the world.

The company employs about 15,000 people across 41 stores.

News of the deal comes a little over a month after first reports that Hudson's Bay was interested in buying Saks.