That’s a hard lesson that’s been learned at Hudson’s Bay Company, according to CEO Helena Foulkes, who now says of the retailer’s price cuts:
I think we took it too far.
She’s quite correct. If you’re a customer who lived near to a former Sears outlet, then the deals on offer at Hudson’s Bay were possibly enticing and picked up new business; but elsewhere, the cuts just added to a declining sales line, down Canadian $47 million year-on-year for the most recent quarter. Or as Foulkes explains it:
There was a big opportunity in 2018 and even before, as Sears was closing their stores, to go after that and really pull in Sears customers into our stores. Out of the gate, we did a really nice job with that. We saw nice performance in our stores that were located near Sears…actually what we ended up doing was instead of focusing on lower price inventory for those customers shopping at Sears stores, we really took it across the chain..the simplest way to think about it is in our premier locations, we were taking the best category of merchandise out of our stores and that led us to…be not as differentiated as we wanted with the customer.
One year on
With a year under her belt as the turnaround CEO of the Canadian-headquartered retail institution, Foulkes is coming under increasing pressure to deliver on the restoration of the firm’s fortunes. The ‘honeymoon’ grace period to which every incoming CEO is entitled and during which blame can be passed to the previous regime is over; it’s time to deliver. She, of course, insists that this is happening and that:
The good news about all this is that it's fixable. This is not some foundational element that we can’t figure out. We’re on it.
Certainly she’s able to reel off a list of actions that have been taken under her reign to date:
After an intensive review of our businesses, systems and operations, we took bold, strategic actions while fixing the fundamentals across the organization…We’ve streamlined the organization which has enabled us to focus on our North American operations. We have divested [failed e-commerce gambit] Gilt, entered into a partnership for our European retail operations and real estate assets, and are currently optimizing the Lord & Taylor and Saks Off Fifth footprints and closing Home Outfitters.
There are two main successes that can be pointed to - the performance of the flagship Saks 5th Avenue store and the overall digital growth. Of the former, Foulkes says:
Saks continues to build upon its long-term strategy to elevate the brand through a fashion forward offering and increased customer engagement with an emphasis on personalization, individuality, and ease. Styling, service and an omni-channel experience are core differentiators for Saks…With the New York flagship’s ongoing renovation, we are reimagining and redefining the store concept and evolving the way customers experience luxury shopping.
On the wider digital strategy, Foulkes points to an 8.7% year-on-year growth rate as indicative of being on the correct path:
We see an opportunity to increase our digital penetration and have a road map to do so. For example, we’re making improvements to the shopping experience through the introduction of personalized home pages and improved site speed and navigation. At Saks, we’ve begun implementing online recommendations based on previous purchases and style preferences. This is the gateway into offering deeper, intuitive personalization across the entire digital platform, a priority in 2019.
We’re also continuing to elevate the omni-channel experience by providing our frontline sales associates with the necessary digital tools to drive sales while supporting a frictionless shopping environment. One example is with Saks, where we are using geo-locating technology to connect in-store associated with customers shopping through our mobile app. More broadly, we’re taking our highest traffic channel online and fusing it with our best converting channel, our store associates. We’ve seen positive results from these new ways of connecting with our customers.
A year ago, stores were growing faster than the digital business, and I see now really nice momentum in digital at Saks. What I’m particularly excited about there is it’s the marriage of the online and the store that allows us, I think, to differentiate and be very meaningful to customers.
There are certainly some signs of progress being made, but it’s very slow in coming through. All the right words are there - marriage of online and store, yada yada yada - and the direction of travel is the correct one. But 2019 is the year when there needs to be much more tangible evidence than has been on show to date that the omni-channel transformation efforts are paying off.
When she took over last February, Foulkes made the point that where Hudson’s Bay Company had fallen behind was on execution of strategy. With that sentiment, she set the benchmark for how her time as CEO would be measured. The cost-cutting spree was an unenforced error, but one that is, as she notes, fixable. Whether every problem can be dealt with quite so straight-forwardly remains to be seen.