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Saks Spins Stores and E-Comm Into Standalone Sisters

Are two Saks better than one?

The e-commerce business of Saks Fifth Avenue (SFA) will become a standalone firm known as Saks, parent company Hudson’s Bay Co. (HBC) announced as part of its partnership with capital growth investor Insight Partners. The new arrangement yielded a $500 million minority equity stake in Saks valuing the digital luxury business at $2 billion, with HBC retaining majority ownership. Saks will retain ownership and control of the Saks Fifth Avenue intellectual property, including the brand and visual identity.

Marc Metrick, previously president and CEO of SFA, will become the CEO of Saks. “For nearly a century, our customers have loved and trusted the Saks Fifth Avenue shopping experience, cementing the brand as a leading fashion authority and setting the bar in luxury retail. As a standalone company, we are well-positioned to make the appropriate investments to drive exponential growth and deliver the same exceptional experience online,” Metrick said. “We are energized by the opportunities that lie ahead for our customers and our vendor partners. This is a pivotal beginning of Saks’ next one hundred years as a leading luxury retailer.”

HBC said it will “evolve and expand its online experience” through strategic investments under Metrick’s leadership. “These investments will bolster Saks’ already well-established digital business, starting with strengthening its service model through elevated styling capabilities and data-driven personalization,” it added. “Ultimately, Saks will feature a hybrid retail and marketplace platform, expanding its assortment while maintaining a curated experience.”

HBC CEO Richard Baker credited Metrick for driving a “total transformation of the brand and customer experience.”

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“His efforts, along with those of his expert management team, enabled the business to generate industry-leading top-line growth and impressive market penetration,” said Baker, who also holds the titles of governor and executive chairman at HBC. “With this, I am confident that he will bring this same innovative leadership to Saks as it embarks on its journey as a standalone e-commerce company.”

Though slow to adapt to digital, the luxury sector has embraced the web in recent years, with companies like Farfetch carving out success with selling premium wares online. Changes in the high-end landscape are responsible for the Saks spin-off, Baker noted.

“Luxury e-commerce is poised for exponential growth, and as a standalone digital company with an existing strong position in luxury, Saks is primed to win significant market share,” he said. “With this move, we are redefining the luxury shopping ecosystem, supercharged by an enviable customer base, incomparable brand equity, long-standing relationships with top designers, and exquisite stores in top markets across North America.”

Merging Saks’ fashion expertise with “a renewed digital focus” will enable an “unmatched shopping experience” discerning consumers, he added, noting how the deal underscore HBC’s “ability to unlock significant value within our company’s assets.”

Insight Partners, a global venture capital and private equity firm, has made a name for itself helping to scale technology and software companies, raising more than $30 billion in capital commitments and investing in over 400 companies worldwide since it was founded in 1995.

There’s been speculation since January that a split would be a necessary precursor to Saks filing for an initial public offering later this year, as the digital business outperforms its store-based counterpart.

As for the brick-and-mortar operation, the 40-store fleet will operate as a standalone known as SFA, and will be a wholly-owned by HBC. In separating the two, each one will be better able to invest for its own future growth.

Still, the two entities will be related and work together to provide a “seamless customer experience.” Saks Fifth Avenue will remain as the customer-facing name for both businesses. Returns, exchanges and SaksFirst credit cards will continue to be accepted both online and in stores. Saks will lead the marketing and merchandising across both businesses, while the stores will fulfill the physical functions of Saks, including buy online, pick up in-store, exchanges, returns and alterations.

HBC said on Friday that Larry Bruce, a 20-year Saks Fifth Avenue veteran and director of stores for the past eight years, has been named president of SFA. He will reported directly to Baker. “Saks’ expanding online presence will drive brand awareness while the physical locations will continue to serve as an important customer touchpoint,” Metrick said, describing Bruce as “the right leader to continue driving the store fleet into the future.”

HBC said Rhône Capital, a significant shareholder in the parent organization, was actively involved in the transaction. “There is great potential in businesses that operate at the intersection of retail, technology and real estate,” said Franz-Ferdinand Buerstedde, Rhône’s managing director, adding, “The strategy to expand Saks’ e-commerce offering while continuing to serve customers through its well-positioned store locations will be mutually beneficial, and further solidify the Saks Fifth Avenue brand as the true leader in luxury retail.”