HBC, which runs North American retailers Saks Fifth Avenue, Hudson's Bay, Lord & Taylor and off-price retailer Saks OFF 5TH, on Thursday said it is shutting down its Home Outfitters business in Canada and is "performing a fleet review of Saks OFF 5TH's 133 stores."
The company at this point expects to close up to 20 Saks Off 5th locations in the U.S., according to a company press release.
The closures are expected to be "slightly favorable" to adjusted EBITDA, according to the release. "These actions are part of the company's strategic plan to reduce costs, simplify the business and improve overall profitability," the company also said.
HBC has staked a lot of its financial strategy on its real estate plays in both North America and overseas, perhaps most profoundly seen in the $850 million sale of its Lord & Taylor flagship in New York City.
But these closures are as much about productivity in its retail side, according to CEO Helena Foulkes, who in a statement pointed to other such moves, including its divestiture of Gilt and the recent merger of its European operations as "further streamlining our retail portfolio [that] enables even greater focus on our businesses with the strongest growth opportunities."
They will only help the bottom line, the company said, because home sales will be taken up by Hudson's Bay Co. department stores that operate in the same markets as the to-be-shuttered Home Outfitters stores and because the company will be closing down underperforming Saks Off 5th stores.
Although it shows that HBC may have taken its Saks off-price unit too far, weeding out lesser locations is really one of the few plays available for a retail conglomerate in a world with too many stores, according to retail analyst Nick Egelanian, president of retail development consultants SiteWorks.
"The Saks brand has clearly been diluted a bit and they probably overextended the Off Fifth concepts within the larger context. That said, I don't think it is indicative of any of the kinds of problems at Saks that we see at JC Penney, Sears and other former 'full-line department stores,'" he told Retail Dive in an email. "They are largely obsolete while Saks is in the very narrow and crowded, but still very relevant high end fashion department store niche along with Neiman Marcus, Bloomingdales and Barneys. ... Without store growth to mask over other operational problems, most chains now MUST look to pair down and eliminate underperforming stores and become more efficient and productive overall."