International analysis: After Kaufhof buy, what next for Hudson's Bay?

Canada’s Hudson’s Bay Company (HBC) and Germany’s Metro Group have agreed a deal for the latter’s Galeria Kaufhof chain, signalling a new era for department store retail in Europe. HBC will acquire Kaufhof and its Belgian subsidiary Inno for €2.83bn (£2bn).

Rival German department store operator Signa’s dreams of a pan-European department store group have all but vanished with this merger. The takeover suggests Galeria Kaufhof may well remain in its present form for the time being, with the battle for supremacy in the German department store sector between Karstadt and Kaufhof continuing.

Galeria Kaufhof will operate as a format unto itself, joining its new owner’s portfolio, which comprises Hudson’s Bay, Lord & Taylor, Saks Fifth Avenue, Saks Off 5th and Home Outfitters.

HBC’s plans will feature “expanding the Galeria Kaufhof brand matrix; growing Galeria Kaufhof’s ecommerce; optimising key merchandise categories; and pursuing the opportunity to introduce the Saks Fifth Avenue and the Saks Off 5th banners in Germany and Belgium, and the potential to build within the existing store network to improve productivity and optimise floor space”.

Moves on multichannel growth are entirely expected. Metro Group has been building out Kaufhof’s online offer - although without spectacular impact thus far. Having acquired the Saks business in July 2013, it has been seeking to cash in on the banner’s long-established resonance in North America. It wasted little time in importing it to Canada and, notably, modifying its concept to a more upscale model, showing a willingness to adapt its formats to the demands of different markets.

Simultaneously, it has pursued a wider roll-out of its Off 5th value clothing banner, which again it has taken to Canada. Clearly, this is a retailer unafraid to try something new in search of fresh revenue streams.

With North American growth hard to find, international expansion seems logical. HBC is looking to bring its Saks Fifth Avenue and Off 5th formats to Europe. Having gained a significant foothold in Europe, it is unlikely to be satisfied with a presence merely in Germany and Belgium. Other markets are likely being studied, with potential targets being lined up in the Nordics, Central Europe and even the UK.

HBC is increasingly developing best-in-class capabilities across its growing portfolio of banners, particularly in respect to omnichannel and luxury retailing, which it can easily export into acquired businesses.

• Howard Lake, editor, Planet Retail