Belk Happy to Take Chains Off Saks’ Hands

Discussion
Aug 03, 2006

By George Anderson


Saks Incorporated is looking to concentrate on its Saks Fifth Avenue luxury department store business and Belk, Inc. has been happy to help. In July 2005, it bought 47 Proffitt’s and McRae’s department stores from Saks. Yesterday, the two retailers announced an agreement for Belk to acquire the 38-store Parisian chain from Saks.


Tim Belk, chairman and CEO of Belk, Inc., said in a company press release: “This is another excellent opportunity for Belk to expand its store base and further strengthen our market leadership in Alabama and other key markets within our existing footprint. Just as with the earlier purchase of the Proffitt’s and McRae’s stores from Saks, the Parisian stores are located in great markets and are similar to Belk in many ways. Parisian is known and respected for offerings of top fashion brands and excellent customer and community service.”


Belk anticipates it will take 18 months for it to fully integrate Parisian into its operations. As with the previous deal for Proffitt’s and McRae’s, the company intends to rebrand Parisian under the Belk banner.


The deal will include Belk paying $285 million for the business as well as picking up the leases for all Parisian locations. The closing date is scheduled for October 2 pending any unexpected regulatory reviews or closing issues.


Saks Incorporated’s CEO Steve Sadove said a substantial portion of the proceeds from the Parisian sale will go to shareholders. 


Discussion Questions: What will this deal mean for Belk and Saks? Where do you see the two businesses going from
here?

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9 Comments on "Belk Happy to Take Chains Off Saks’ Hands"


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Bill Robinson
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Bill Robinson
15 years 9 months ago

The sell off at Saks has created two very strong regional department stores which are poised to compete with Federated in the new department store market. Bon Ton, which bought Saks’ Northern stores, and Belks, which has now purchased all of their Southern stores, will be 3 times larger than they were 2 years ago.

Will these companies be able to exploit the economies of scale available now that each is $3 billion plus? It is an awkward size for a department store chain. The department store cemetary is filled with department stores which were unable to exploit their size in the face of more nimble competitors. Think Marshall Field’s, Mercantile, Allied Stores, Associated Dry Goods, and many more. Will Belks and Bon Ton succeed where others have failed? The keys will be to build regional loyalty and strong competitive differentiation against the national chains.

Aaron Spann
Guest
Aaron Spann
15 years 9 months ago

I believe the biggest factor to consider here is how to keep the current Parisian customer. Belk is only moving into a few new markets with this purchase. Many of the markets that have Parisian already have a Belk somewhere nearby. The kicker here is that a lot of Belk’s stores are small format and the customer will not see this as a “like-for-like” trade. Belk will have to come into these markets and absolutely blow the customer away with service, selection and higher fashion than the typical Belk store has. If they do that then I believe this will be successful.

Craig Sundstrom
Guest
15 years 9 months ago

I’m not sure the comparison w/ADG, Allied, and Merc is valid: these were loose collections of (often second place) stores scattered around the country; Belk is a fairly concentrated regional player; and – the biggest difference – Belk is family controlled enterprise: the graveyard status of the former is due not so much to actual failure, as to the usual claim that they were “underperforming.” (Bonus question: why does the South [still] have so many familial retail empires, and how can the rest of us get one?)

But what does all this say about Saks itself ? They throw together a disparate collection of mid-market and luxury stores — so enamored of the latter that they actually take its name — and then in the space of a few months, divest everything…methinks the world did not see the best and brightest on this one.

lisa stokstad
Guest
lisa stokstad
15 years 9 months ago

I agree that Belk needs to take care of the current Parisian customers with merchandise availability and superior customer service. I am curious as to what the Gross Margin performance is in the Parisian stores with their luxury brands. If it’s strong, then Belk would be smart to keep as many as possible and maintain the specialty store feel. But if they are not performing, Belk will pull them, and quickly. With the acquisition of Proffits, McRaes, Migerobe Fine Jewelry, and now Parisian, they obviously know how to handle a dollar or two wisely!

Carolyn Collier
Guest
Carolyn Collier
15 years 9 months ago
Being from Birmingham, this is a sad day for Parisian and all the people who shopped Parisian for so long.. It was founded in 1887 and there is not one person I know who did not grow up with a certain Parisian location ( Mine was Vestavia ). Knowing McRaes well, it will be nice to know if it is loyal and caring to the associates. McRaes was “Homier” more relaxed. But if you wanted that right outfit it was Parisian. Parisian has always had the best clothes, vendors, style and fashion. It was Saks 5th Ave without the huge price tag (although some things were very expensive). If you want Belk to move ahead with Parisian, here is the key : Keep the fashions, the vendors. Add vendors that Macy’s and and others don’t have. Keep the customer in the store. Keep the hair salons as they are. Add a day spa. Have a coffee corner Blend in Senior’s day as McRaes had. Expect loyalty from associates in return for loyalty, especially ones who… Read more »
Mark Lilien
Guest
15 years 9 months ago

Belk is likely to succeed with the Parisian stores. Belk had some costs integrating McRae’s and Proffitt’s, but the expense has been relatively modest so far. Parisian is likely to be integrated without much disruption to Belk’s financials, also. As with McRae’s and Proffitt’s, the loss of the Parisian name may rub some customers the wrong way, but the disruption won’t be traumatic to Belk. Saks needs to focus on the less than stellar results of their luxury brand. Their assortment isn’t compelling. They need a quantum leap in exclusive labels with outstanding fashion. I doubt anyone would characterize Saks current assortment that way today.

Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 9 months ago

Saks has the BEST brand equity, loyalty and awareness.

Saks will turn to its major city outlets, and start doing what it has done in the past…cater to the upper income, fanatically and impressively with its wide range of foreign and U.S. stylish offerings.

Belk can prosper with its acquisition and the mid tier position and secondary markets.

Great fit and strategic moves by both! Hmmmmmmmmmm

Aaron Spann
Guest
Aaron Spann
15 years 9 months ago

Belk will fail miserably in the markets that Parisian is in if they do not lux the stores out. Parisian shoppers are more sophisticated and already have another mid-tier store they frequent for normal purchases. Parisian was the Bloomingdale’s of the South. I agree that Belk should run 2 banners, like Federated and keep the stores completely different from one another; merchandise overlap is what messed up Lord & Taylor while May Co. had it anyway (specifically the Downtown Pittsburgh store).

I’m not saying that Belk is bad, I just believe that they’re assuming no one will see the difference between them and Parisian. There are only a handful of nice Belk stores that could compete with a Parisian. On the other hand there are some Parisian locations that could be better suited as a Belk. This is not a “one size fits all” situation.

Robert Craycraft
Guest
Robert Craycraft
15 years 9 months ago
Belk is well-positioned to become a major department store player. In markets where they have taken over former Profitt’s locations there is a new air of excitement and fashion in the stores and the service level has skyrocketed. I even opened a Belk’s charge, something I would never have done at Profitt’s, as I have consistently been impressed with this store’s merchandise, merchandising, and service when traveling throughout the Southeast. There are so many excellent points made above, but I am going to echo a few: Number One, make it easier to stay in the store. Lounge areas, a cafe or restaurant in the larger stores, beauty salons, optical, etc., all the ancillary services that kept us in our favorite stores for hours and hours. Number Two, don’t be afraid to be yourself and don’t try and be something for everyone…that translates into nothing for anyone (see http://www.macys.com for reference). You are a family-owned store from the South and if that means putting up a Christmas tree and having a nativity scene in the window… Read more »
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