HBC, the owner of Saks Fifth Avenue said Friday it will split the luxury department store’s website into a separate business from its stores after it raised $500 million.
The separation allows Saks.com, which has about $1 billion in annual sales, to raise money to fuel its growth, the company said. E-commerce has experienced explosive growth during the coronavirus pandemic with several luxury retailers showing resilience.
“Luxury ecommerce is poised for exponential growth,” said HBC chief executive officer Richard Baker on Friday. “Saks is primed to win significant market share.”
HBC said few changes will be noticeable to customers. Saks Fifth Avenue will remain the brand name for both the stores and e-commerce business, and shoppers will be able to buy online and pick up their purchases in stores. They will also be able to make returns and exchanges using their Saks credit cards either at stores or online, the company said. The online business will oversee marketing and merchandising for both segments.
Venture-capital firm Insight Partners has put up $500 million for a minority stake in Saks.com, giving the business a $2 billion valuation. The money will be used to invest in faster shipping, easier returns and better customer service, Saks’ 40 brick-and-mortar stores will become a separate business known as SFA, which will remain wholly owned by HBC.
Marc Metrick, who was CEO of the combined Saks businesses, is set to become CEO of the new digital company.
Metrick touted the spinoff, adding: “As a standalone company, we are well-positioned to make the appropriate investments to drive exponential growth and deliver the same exceptional experience online.”
Former WeWork and Amazon exec Sebastian Gunningham is joining the e-commerce company’s board, and Saks veteran Larry Bruce has been appointed president of the SFA business, reporting to Baker.
HBC was taken private last year by a group of shareholders that includes Baker. HBC also owns the Hudson’s Bay department store chain in Canada, and the discount business Saks Off Fifth.
Insight Partners’ other investments e-commerce platform Shopify, social media site, Twitter and subscription meal kit service, Hello Fresh.