Saks or no Saks? Apparel retailer’s takeover by Hudson Bay causes jitters over Saks’ Jackson ops center

by Ted Carter

Published: October 11,2013

Tags: Business, jobs, Mississippi, Saks Fifth Avenue

In the wake of the aqcuisition of Saks by Hudson Bay, there are many concerns that the hundreds of jobs at the Jackson Service Center could be in jeopardy. (Photo by Tacy Rayburn/MBJ)

In the wake of the aqcuisition of Saks by Hudson Bay, there are many concerns that the hundreds of jobs at the Jackson Service Center could be in jeopardy. (Photo by Tacy Rayburn/MBJ)

Canadian retail apparel giant Hudson Bay Co.’s $2.9 billion acquisition of Saks Fifth Avenue and its plan to trim $100 million (Canadian) in back office costs could have consequences for Saks’ longtime operations center in Jackson and its approximately 600 employees.

Some of the anxiety in Jackson comes from Hudson Bay’s relocation of its information technology operations center from Toronto to St. Louis, a move the retailer announced several months before making its bid to acquire Saks. Hudson Bay, which operates the Lord & Taylor brand in the United States and the Bay brand in Canada, says the move of its operations center to St. Louis is part of a companywide consolidation effort.

In a March 2013 report in the St. Louis Business Journal, Hudson Bay’s logistics and information services vice president Bill Tracy said the consolidation in St. Louis would occur over a two-year period and involve the hiring of 137 new information services workers. With the facilities construction and renovation of existing space, Hudson Bay is in line to receive about $6 million in Missouri state tax credits, the St. Louis Business Journal reported.

Whether the acquisition means an increase in jobs at the Jackson operations center on U.S. Highway 80, a loss of jobs or status quo won’t be known until after the deal closes in November, Saks spokeswoman Julia Bentley said. “We don’t know what their specific plans are post- merger,” she said of Hudson Bay. “We’ll know more within the next few weeks.”

She noted the new corporate structure has yet to be determined, though Reuters reports executive leadership will not include Saks’ current top two executives: Chairman and CEO Stephen Sadove and president and chief merchant Ronald Frasch.

When the companies unveiled the takeover plans in July, analysts expected Saks would continue to be led by key members of its existing management.

Blake Wallace, executive director of the Hinds County Economic Development Authority, said he has been in contact with Saks executives since the takeover announcement. “What they are looking for is savings for now,” mainly through new efficiencies, he said.

While the Saks ops building may be “second to none” as Wallace describes it, the same can’t be said for the properties around it at Interstate 20 and U.S. Highway 80.

So it should not surprise anyone if Hudson Bay is unhappy with what it sees on U.S. 80, said Nina Holbrook, a commercial real estate professional and director of the U.S. 80 Coalition, which serves as a business association for the highway corridor that has deteriorated over the years to become home to an array of pawn shops, check cashing stores, tattoo parlors, used tire stores and rundown strip centers.

“Why would you want to be on Highway 80 in Jackson?” she asked, voicing frustration at the steady decline of the corridor and what she says is the City of Jackson’s inattention to it.

Commercial real estate broker Scott Overby said he would put the operations center “high on the endangered list.”

”Does the Highway 80 corridor play into any decision? You better believe it does,” said Overby, whose commercial real estate firm the Overby Co. is upgrading the aging Metrocenter Mall in an effort to sell it on behalf of a California bank that foreclosed on it last year.

The $2.9 billion Hudson Bay acquisition has been approved by each company’s board and is subject to the approval of Saks’ shareholders, among other conditions, Reuters reports.

In announcing the acquisition, Hudson Bay said it plans to consolidate back office operations and eliminate duplications throughout the merged operations. Specifically, Hudson Bay wants to cut operational costs by $100 million (Canadian) in the three years following the merger, including $50 million in the first year.

Neil Stern, a senior partner at retail consulting firm McMillanDoolittle, said on one hand the merged company may need to grow its information services operations as it ramps up e-commerce sales. But on the other, the new company will look closely at what it can achieve through consolidation, he said.

“They will be evaluating their needs which certainly include expanded e-commerce against current capabilities and facilities,” Stern said in an email. “They will be looking for potential duplication for costs savings.”

The New York-based Saks, like other high-end apparel retailers, reported weak sales in the spring and early summer. Saks lost $19.6 million, or 13 cents per share, in the most recent quarter. That compares with a loss of $12.3 million, or 8 cents a share, in the prior-year period, the Associated Press reported.

Saks generated revenue of $3.15 billion last year and boasts of posting 14 consecutive quarters of comparable stores sales increases. The luxury retailer has been closing under-performing stores, having slimmed down to 41 namesake stores, compared with 54 in 2007. It also runs 68 Saks Fifth Avenue Off 5th Stores, and will add a store in Pearl’s soon-to-open Outlets of Mississippi retail plaza.

Hudson Bay, meanwhile, has announced it will cut its quarterly dividend to 0.05 per share Canadian from 0.0937 per share after closing the acquisition. The company says it will redirect cash flow to reducing debt.

On the close of the deal, the combined company will operate 179 full-line department stores, 72 outlets and 69 home stores,

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