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Spec Talk: Saks/Kohl’s,Ted Baker/Sycamore, Burberry/Future?

This week’s Spec Talk looks at whether Saks could be fueling Hudson’s Bay’s interest in Kohl’s, and who could be making a takeover bid for Ted Baker. Plus, questions emerge on Burberry’s future.

Is Saks why HBC’s gunning for Kohl’s?

Hudson’s Bay Co. emerged this week as a bidder for Kohl’s, which is evaluating its strategic options following an activist push to drum up shareholder value. Bids reportedly were due Wednesday.

So why Kohl’s? Sources said sales at the Hudson’s Bay department store have been tepid at best, hard hit by Covid and supply chain issues, not to mention 30-year high inflation. Saks, on the other hand, is sitting pretty, riding the coattails of a luxury wave driving sector sales from $55 billion to $70 billion between 2020 and 2021 with little sign of slowing down.

But with inflation rising wolrdwide, sources said HBC chairman Richard Baker knows the luxury surge won’t last forever. Kohl’s is looking to boost digital to “at least $8 billion,” squeeze $1 billion out of the SO juniors line and ride Sephora shop-in-shops to $2 billion in volume in the next three years. And the Amazon partnership helps get bodies through doors. All that could provide a nice cushion for HBC when luxury sales cool off, sources said.

Sycamore sizing up Ted Baker?

Ted Baker might have found a buyer.

Sycamore Partners Management, the U.K. arm of U.S.-based Sycamore Partners, is in the “early stages of making a possible cash offer” for the women’s high-street fashion label. Sycamore’s regulatory filing Friday said there can be “no certainty that an offer will ultimately be made nor as to the terms” of any offer. Ted Baker PLC, noting the private equity firm’s announcement, said “it has not received any approach.” U.K. takeover rules give Sycamore until April 15 to definitively state whether it will bid or walk away. Sycamore has also expressed interest in bidding for Kohl’s.

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Ted Baker, for its part, pointed out that it “continues to make good progress with its transformation.” While it claims it emerged from Covid as a stronger and more financially sustainable business, a sale to Sycamore might grease the wheels for future success.

The U.K. high street retailer reported a 107.7 million pound pre-tax loss ($151.9 million) in 2020, the result of plummeting demand for dressier fare during the heart of the Covid-19 pandemic. In the same year, company founder Ray Kelvin sold half his stake in the company to Toscafund to secure 105 million pounds ($148.1 million) in emergency funding for the contemporary label, according to The Guardian. In turn, Toscafund became the firm’s largest shareholder with a 26.4 percent stake, with Kelvin holding a 12 percent share. Kelvin had been CEO, but left the firm in March 2019 because of allegations connected to inappropriate behavior, which he denied.

What’s next at Burberry?

All eyes will now be on Jonathan Akeroyd, former Versace CEO and incoming CEO of Burberry Group as of April 1. Of interest will be whether chief creative officer Riccardo Tisci stays on at the British luxury brand. Burberry said last June said it expects Tisci to hang around, but that was before Akeroyd was named CEO in October.

So, what’s the issue? Burberry claims its strategy continues to attract new, younger consumers, but that roadmap was the work of former CEO  Marco Gobbetti, who decamped for the chief executive role at Ferragamo. HSBC analysts aren’t convinced Akeroyd should “stay the course” with Gobbetti’s one-time strategy when he officially takes the helm in roughly two weeks.

In a research note on Friday, HSBC analysts noted that while Burberry was once considered a target candidate in the M&A world, a deal has failed to materialize because of the “magnitude of the work that’s still ahead.” They believe that following a strategy that “has not been successful and was defined more than four years ago by a CEO who has since left is probably wrong.” The “only iconic global British brand” in the luxury space should focus on its strong credentials in outerwear first, before aggressively building out its handbag and footwear categories, analysts said. And they believe Tisci’s contemporary look is a bit too “niche-y” for the “breadth of the Burberry brand and the aspirations of consumers.”

So where does that leave either Akeroyd, Tisci or Burberry? Only time will tell.