The Hudson’s Bay Co. is boosting its presence in the off-price retail sector with a new concept it calls Find @ Lord & Taylor. The Toronto-based department store giant introduced the first of these stores in November, in Paramus N.J., near the Outlets at Bergen Town Center and less than a mile from its full-price Lord & Taylor store at Garden State Plaza. HBC has -announced plans to open six more of these new stores this year, all in the Northeastern U.S.
“In general, Lord & Taylor getting into this outlet business makes all the sense in the world, because for a lot of consumers, this is where they are looking to shop, and this is how they’re shopping,” said Karen Bellantoni, a vice chairman at RKF, a New York City–based retail real estate brokerage. And there remains room for growth within the value-price sector, she says, especially as relates to department stores.
The Find @ Lord & Taylor stores will carry a range of apparel, footwear, home goods and accessories across some 30,000 square feet of selling space. “Off-price continues to be a key driver of [our] growth strategy, and we are thrilled to expand this business with the introduction of our newest concept,” said Hudson’s Bay CEO Gerald Storch in a prepared statement. “We see significant opportunity for expansion and remain committed to investing in this sector through new store openings and developments.”
Having acquired Galeria Kaufhof, Germany’s largest department store chain, in October, the company now operates nine department store concepts that range from luxury to off-price. In North America these are Hudson’s Bay, Lord & Taylor, Home Outfitters and Saks Fifth Avenue, as well as the off-price Saks Fifth Avenue Off 5th. Besides Galeria Kaufhof, the European names are Galeria Inno and Sportarena.
Off-price stores have been an increasingly popular growth venue for department store chains in recent years, so Find @ Lord & Taylor will be competing with the likes of Bloomingdales Outlet, Macy’s Backstage, Neiman Marcus Last Call and Nordstrom Rack. “This is a competitive sector, but as with the other brands — Bloomingdales, Nordstrom, et cetera — each full-priced department store has their devotees and core shoppers who will flock to the off-price version,” said Faith Hope Consolo, chairman of the retail group at Douglas Elliman Real Estate, in New York City.
Find @ Lord & Taylor enables HBC to operate more than one off-price store within the same trade area, as it will be positioned differently than the higher-end Saks Off 5th. Find @ Lord & Taylor is a midprice concept operating between the premium Saks Off 5th and the value-retail likes of T.J.Maxx. In fact, HBC has a Saks Off 5th at the Outlets at Bergen Town Center.
The timing of HBC’s newest concept might also prove advantageous because the company has seen a strong U.S. dollar affect tourist spending, putting pressure on its luxury business at Saks. HBC says it remains positive about the long-term prospects for the luxury side, but these headwinds are expected to continue this year, according to a research report by Cowen & Co. The trend may provide incentive to diversify into the off-price sector, especially given that third-quarter 2015 comparable-store sales in the Saks division were off by 3.6 percent, while the Saks Off 5th stores were up by 2.8 percent. “We have a great synergy between operating these department stores and then having the ability to send legitimate sell-off into the off-price space,” Storch said in a third-quarter earnings call. Customers like a treasure hunt for gems from both Saks Fifth Avenue and Lord & Taylor in the off-price environment, he said. “It’s obviously a better-performing segment overall compared to some other retail segments.”
HBC aims to use Find @ Lord & Taylor to target younger shoppers with trendy brands at savings of up to 70 percent off retail prices. The concept is likely to appeal to Millennials, who have grown up with cheap-chic, fast fashion from the likes of Forever 21, H&M and Topshop, says Consolo. “They are also used to mixing high-end pieces with low-end pieces and look to discount outlets to get their high-end at the best price possible,” she said.
HBC acquired Lord & Taylor Holdings in 2012, and that chain currently comprises 50 stores, with a heavy representation in the U.S. Northeast. Lord & Taylor typically attracts fewer shoppers than department store competitors with lower annual sales relative to competitors.