Thursday, August 03, 2006

Belk reaches upscale

Belk, Hanes Mall, Winston-Salem, North Carolina. Lower level mall entrance. Photographed with camera phone 8/02/05.

Purchase may improve appeal to women

Nichole Monroe Bell

The Charlotte Observer

CHARLOTTE -- Belk Inc. said Wednesday it will buy Parisian department stores from Saks Inc. -- a move that will take Belk to three new states and could bring higher-end women's clothing and shoes to the chain.

In a $285 million cash transaction scheduled to close in October, Belk will purchase Parisian's Birmingham, Ala., headquarters and 38 stores in nine states across the Southeast and Midwest.

The purchase includes stores in Indiana, Michigan and Ohio -- states where Charlotte-based Belk has no stores. Parisian has no stores in North Carolina; in South Carolina, it has stores in Charleston and Columbia, where Belk already operates.

Belk is the nation's largest privately owned department store company. After the purchase, Belk will operate 317 stores in 19 states.

Belk spokesman Steve Pernotto said the purchase works well for Belk because both companies are based in the South and have a similar operating philosophy. For example, he said, both stores have similar credit card plans and customer perks such as free gift wrap.

Belk plans to rebrand the acquired stores as Belk in the third quarter of 2007. Employees in those locations will be offered positions with Belk.

Britt Beemer, who heads the Charleston-based market research firm America's Research Group, said Belk's success will depend on whether it takes advantage of Parisian's strengths.

"Belk has always been known as a pretty (middle of the road) department store and not as fashionable in its merchandising as Parisian has been," Beemer said. "The question will be will the Parisian customer like the merchandising that Belk presents?"

Pernotto said the differences between the stores can be used to bolster each. Parisian, he acknowledged, is stronger in higher-end women's apparel and women's shoes. On the other hand, Belk does better with men's sportswear and home merchandise, which can be used to strengthen Parisian stores, he said.

The Parisian deal marks the second time Belk has purchased stores from Saks, which is shedding mid-market department stores to focus on its Saks Fifth Avenue, Saks Off Fifth and Club Libby Lu stores. In 2005, Belk purchased 47 Proffitt's and McRae's stores from Saks in a $623 million deal. With those stores part of the chain, Belk saw its profits for the year increase more than 10 percent, reaching a record $136.9 million.

Parisian wasn't for sale when Belk made the Proffitt's and McRae's purchase, Pernotto said.

The Parisian purchase also pushes Belk deeper into the mall market, an area where growth has been slowing in recent years. About 80 percent of Parisian stores are based in malls compared with Belk, which is about equally divided between malls and free-standing stores.

Belk isn't worried.

"We don't see that as a big risk," Pernotto said. "That's only a problem if your entire strategy is entirely mall-based."

Wachovia Securities, the investment banking unit of Charlotte-based Wachovia Corp., advised Belk on the Parisian transaction.

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