‘Europeans tend to recognize brands better’

Continued from FP1

Last year the owner of Lord & Taylor and Saks said it would open up to 20 stores in the Netherlands, where the market faced a void after the collapse of Dutch department store V&D in late 2015.

“In the internet era you may not need as much space as what existed in the past,” Storch said. “They had 60 stores covering the Netherlands, and we are targeting 20 stores.”

Given increased investor trepidation in a year that has seen U.S. malls grapple with an unprecedented wave of closures, any expansion can be seen as risky. In the first quarter, comparable sales at HBC Europe were flat, and in the prior fiscal year, comparable sales fell 1.2 per cent.

Market observers will be watching HBC closely Tuesday when the company discloses its second quarter results after markets close. The company’s shares have risen about 43 per cent since midJune when Jonathan Litt, founder of Land & Buildings Investment Management LLC, began putting pressure on the retailer to explore options for its real estate and threatened a proxy war if the company didn’t find a way to monetize its assets. Land & Buildings owns 4.3 per cent of HBC’s shares.

Storch said he could not comment on recent reports that HBC governor Richard Baker was looking at strategic options, including privatizing the company, as part of a solution after alleged attempts to merge with Macy’s and Neiman Marcus failed.

When asked whether pressure from Land and Buildings was interfering with HBC’s retail strategy, Storch said “there is generally alignment on the real estate side with what we want to do and with what they suggest that we do. We remain focused on improving and growing our retail operations even as, of course, we continue to evaluate opportunities to ensure the best use of our both owned and leased locations (and look to) generate value from our real estate portfolio.”

HBC has announced 15 of its expected 20 locations in the Netherlands, which will include three stores under the Saks Off Fifth banner in addition to the Hudson’s Bay brand.

HBC could use the growth, said Jennifer Marley, a partner at the Toronto-based Sklar Wilton and Associates, who called the Netherlands a “great move” for the retailer. “Brand Canada,’ let’s call it, has been especially powerful in the Netherlands since World War Two,” she added, when members of the Dutch royal family stayed in Canada for five years.

George Minakakis, principal at Toronto-based Inception Retail Group, said the expansion could prove challenging for HBC. “The damage online (business) is doing to retail in Europe is more significant than it is here,” he said, with greater ease of logistics due to the smaller geographic footprint.

“You do not find a lot of higher-end department stores in Europe, so your service value is a lot better than anyone else’s and if I pay you more money for a shirt or a dress, then it has got to be worth it. It might be tough to break in, but Europeans tend to recognize brands better than anyone else does.”

Despite a far higher percentage of e-commerce in overall retail in Europe, Storch said the market there has never experienced the same over-saturation of stores as in the U.S.

“The U.S. is the densest market in the world for retail, and Canada is about one-third less than the U.S.,” he said. “Europe is just a fraction, even, of Canada.” Market observers will be watching HBC closely Tuesday when it discloses its second quarter results.