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Hudson's Bay to invest in Kaufhof

March 11, 2016

Canadian retail giant Hudson's Bay is reportedly planning to invest massively in Germany's Kaufhof department stores, saying it strongly believed in a future for big inner-city retail outlets.

Deutschland Filiale von Galeria Kaufhof in Köln
Image: picture-alliance/dpa/O. Berg

In an interview for the German business daily Handelsblatt on Friday, Hudson's Bay chief executive unveiled plans to invest one billion euros ($1.1 billion) in Kaufhof department stores over the next five to seven years.

"It's a big amount because we are convinced that Germany is a great market and that department stores have a future here," CEO Jerry Storch was quoted.

Storch also said that the Canadian company would open a new department store in Luxembourg in 2018, as it was expanding further in Europe: "Apart from the German-speaking regions, we think the Benelux countries are interesting for us."

Difficult market

Toronto-based Hudson's Bay, which operates its namesake department stores in Canada and the Lord & Taylor and Saks chains in the US, bought Kaufhof from German retail group Metro for 2.8 billion euros last year.

The acquisition included the operational department store business in Germany and Galeria Inno in Belgium, as well as the correspondingly owned real estate portfolio. Kaufhof runs 103 department stores and 16 SportsArena stores, many of which are prized real estate properties in Germany's biggest cities.

German department stores on their way out?

05:03

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Germany's retail market, however, is difficult because shoppers can be frugal and demanding. US retail giant Wal-Mart, for example, had to give up its German operations after not being able to turn around its 85 stores. Another large-scale retailer, Carrefour of France, has deliberately steered clear of Germany.

Aware of the challenge, Hudson's Bay aims to invest part of the money in 40 new outlets of its high-end Saks off Fifth brand in Germany. "We believe the outlet business is just starting to develop in Germany," CEO Storch told Handelsblatt, adding that many of its competitors were mainly "focused on mass markets."

In addition, the Canadians plan to invest in expanding its online retail business and in renovating existing Kaufhof department stores.

uhe/hch (dpa, Reuters, AFP)

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