Belk keeps silent on rumored acquisition

LEIGH DYER
Charlotte Observer Staff Writer

Charlotte-based Belk Inc. is keeping mum about whether it's any closer to buying stores from Saks Inc., despite a national report Friday that a deal is in the works for Belk to acquire two regional department store chains from the Saks Fifth Avenue parent.

Women's Wear Daily reported Friday that Belk has an agreement "in principle" to buy the Proffitt's and McRae's chains from Saks, citing unnamed "people with knowledge of the situation."

But neither retailer confirmed the report. "It's rumor and speculation," said Belk spokesman Steve Pernotto.

Julia Bentley, spokeswoman for Alabama-based Saks, added via e-mail: "We have made no announcement re what was in the Women's Wear Daily article."

Belk has previously announced it plans to grow by 10 to 15 stores a year and has already announced 12 new store openings for this year. Proffitt's, with 22 stores, and McRae's, with 29 stores, would be a big jump for 226-store Belk. The Proffitt's and McRae's stores operate in many of the same Southeastern markets as Belk.

Some analysts don't count Belk out as a buyer for the two chains, given the current acquisition-heavy retail atmosphere. The Federated and May department store chains have announced a merger deal, while a group of private equity firms and a real estate concern recently bought Toys "R" Us Inc.

Belk is the nation's largest privately held department store chain, with $2.45 billion in sales last fiscal year. The company outlined its growth strategy Thursday in its 10-K annual report filing with the Securities and Exchange Commission.

"The company intends to continue to open new stores selectively in new and existing markets in order to increase sales, market share and customer loyalty," the document said. "As the consolidation of the department store industry continues, the company also will consider store acquisitions that offer opportunities for growth in existing and contiguous markets."

In January, Belk bought four Proffitt's stores in Eastern North Carolina from Saks.

In recent weeks, Saks officials have acknowledged they're seeking a buyer for their entire 238-store regional department store division, which along with the Proffitt's and McRae's nameplates includes the Younkers, Herberger's, Carson Pirie Scott, Bergner's and Boston Store chains, plus Club Libby Lu specialty stores for girls. The regional stores have been underperforming compared with the Saks Fifth Avenue division, which has benefited from a boom in luxury shopping. The New York Times has since reported that the Saks Inc. board might consider selling both divisions in a package deal.

Robert Plaza, retail analyst for Zacks Investment Research Inc., said Saks would likely prefer to sell all of their regional department stores to the same buyer, but a piecemeal deal with Belk isn't out of the question. "If there's no offers out there, or if there are no offers they're interested in, this may be the approach they have to take," he said.

Saks Inc. operates a Saks Off 5th outlet at Concord Mills and a Club Libby Lu store at SouthPark mall, with plans for a second Club Libby Lu at Northlake mall when it opens this fall. The retailer has been eyeing the Charlotte market for a location for a Saks Fifth Avenue.

But the company has also been shuttering underperforming stores. Friday, the company announced it's closing its Saks Off 5th outlet in Myrtle Beach and shedding 18 employees.

Also Friday, the company's shares fell 7.3 percent after the retailer said it's expanding an internal accounting probe and won't meet the deadline for filing its annual report. The stock closed down $1.37 at $17.47.