Does Saks.com make sense as a separate business?
Hudson’s Bay Co. (HBC) is spinning off Saks Fifth Avenue’s online operations as a separate business in large part to take advantage of lofty valuations being fetched by fashion luxury platforms.
In connection with the move, Insight Partners has invested $500 million for a minority stake in Saks.com, valuing the online business at $2 billion. Saks.com has about $1 billion in annual sales.
The valuation is higher than the $1.6 billion fetched last February by HBC, which owns Hudson’s Bay, Saks Off Fifth as well as Saks Fifth Avenue’s online and offline operations, in its move to go private.
“By separating the dot-com business, we can show investors its value,” HBC CEO Richard Baker told The Wall Street Journal. “Investors don’t want to put their money in bricks-and-mortar retailers right now.”
The move also enables both Saks’ online and offline operations to “appropriately plan for and invest in their respective service models.” That sentiment appears to run counter to retail’s mantra in recent years of merging operations to optimize omnichannel approaches.
Saks.com becomes Saks and will be led by Marc Metrick, previously president and CEO of Saks Fifth Avenue. Saks will lead marketing and merchandising across businesses and retain ownership of the Saks Fifth Avenue intellectual property. Sebastian Gunningham, a former Amazon executive, will join Saks.com’s board.
SFA, the entity representing Saks’ 40 stores, will fulfill the physical functions of Saks.com such as buy-online-pick -up-in-store, exchanges, returns and alterations. The split won’t be apparent to consumers.
Luxury has been slow to embrace online selling with many fashion aficionados skeptical that high-end selling can be replicated online. But explosive online growth during the pandemic is being seen as a breakthrough that has driven up stock prices for Farfetch and Zalando. Fashion platform Mytheresa, with about half of the sales of Saks.com, went public in January of this year at a $2.2 billion valuation.
HBC has acknowledged that an IPO for Saks.com is a possibility. The new funding will be used to speed shipping, enhance customer service and introduce a marketplace.
“Luxury ecommerce is poised for exponential growth,” said Mr. Baker in a statement. “Saks is primed to win significant market share.”
- HBC and Insight Partners Launch Saks as a Standalone Ecommerce Company Set to Rapidly Expand Customer Base in Growing Online Luxury Fashion Market – HBC/ Insight Partners/Business Wire
- Saks Fifth Avenue Owner to Separate E-Commerce and Stores Units – The Wall Street Journal
- Split-Up: Saks Fifth Avenue Stores, E-commerce Becoming Separate Companies – WWD
- Saks Fifth Avenue owner spins e-commerce site into separate business – CNBC
- Hudson’s Bay Company Shareholders Approve Privatization Transaction – HBC/Business Wire
DISCUSSION QUESTIONS: Do you see more benefits than drawbacks in splitting Saks Fifth Avenue’s online and offline operations? Should other retailers separate their online operations?