SAKS OFF 5TH SPLITS E-COMMERCE AND STORE BUSINESSES

Saks Off 5th seems to be following in Saks Fifth Avenue’s footsteps. HBC and growth capital investor Insight Partners announced on Monday that they have entered into a partnership to establish Saks Off 5th’s e-commerce business as a standalone entity. As such, Insight Partners has led a $200 million equity investment in Saks Off 5th’s e-commerce business, valuing the company at approximately $1 billion. Saks Off 5th’s store fleet, consisting of 105 locations across the U.S. and Canada, will be a separate entity, referred to as O5, and remain wholly owned by HBC.

“With a unique market position and on the heels of explosive growth, we are excited to establish Saks Off 5th as the preeminent digitally native luxury off-price retailer,” said Richard Baker, governor, executive chairman, and CEO of HBC. “As a true off-price business with a superior merchandise offering, Saks Off 5th has a significant opportunity to capture additional market share by further expanding its digital capabilities. We are pleased to once again work with Insight Partners on this transaction as they offer unmatched guidance and leadership in the digital space. At HBC, we remain focused on identifying value within our assets and this transaction is a prime example of how we are successfully executing on this strategy.”

Paige Thomas has been appointed president and CEO of the new digitally-native Saks Off 5th business. Thomas will also serve as a member of the board. In this position, she will guide the future direction of the business and focus investments on enhancing omnichannel capabilities, including fulfillment and logistics improvements, supporting infrastructure, and delivering a best-in-class customer experience across all channels.

“Under Paige’s leadership, Saks Off 5th has a clear runway ahead,” continued Baker. “She took the helm just a month before the pandemic and has successfully led the business through a most challenging period, while driving e-commerce growth and enhancing product mix and brand availability. With strong management and a proven operating model in place, I’m confident Paige and her team will continue to accelerate Saks Off 5th’s growth and leading position in the off-price market.”

“There is significant untapped potential within Saks Off 5th’s digital business and with the right investments to support our overall customer experience we will drive exponential growth,” added Thomas. “Saks Off 5th provides a compelling assortment of brands to fashion-seeking customers at the best prices. We will continue to deliver on our brand promise, while introducing an elevated experience through improved digital capabilities, new partnerships, and an expanded product offering.”

Rob Brooks, who previously served as chief customer officer for Saks Off 5th, has been named president of O5. O5 will operate the brick-and-mortar Saks Off 5th stores business similar to a franchise model. Brooks will report directly to Baker and lead a dedicated team responsible for supporting and further enhancing the overall omnichannel experience. Marketing and merchandising will be led by Saks Off 5th for both businesses to deliver a cohesive experience as the customer-facing brand will not change. Stores will continue to be an integral customer touchpoint for the brand. Returns, exchanges, and SaksFirst credit cards will continue to be accepted both online and in stores.

“Rob has been a true partner to me and instrumental in guiding Saks Off 5th through the pandemic, ensuring our customers are at the center of our decision making,” continued Thomas. “I look forward to continuing this collaboration as we ensure a cohesive approach for our customers across our stores and digital businesses to deliver a strong omni experience.”

If this news sounds familiar, earlier this year, HBC announced it was splitting up its full-price Saks Fifth Avenue store fleet and e-commerce businesses. Saks.com is now its own standalone business in partnership with Insight Partners, which made a $500 million minority equity investment in Saks at the time of the original announcement in March.

In May, Saks.com has closed on a syndicated $350 million asset-based five-year revolving credit facility arranged by Bank of America, and a $115 million senior secured term loan arranged by Pathlight Capital.

And, last week, the retailer disclosed that NBA All-Star James Harden made a minority investment in the retailer and joined its reimagined board of directors, which also includes executives from Insight Partners, Rhône Capital, Richard Baker, and Saks CEO Marc Metrick.