Off-price is going omni-channel in a deal that will team online luxury flash-sale site Gilt and discount department store chain Saks Off 5th. Toronto-based department store conglomerate Hudson’s Bay Co. (HBC), which owns and operates the Hudson’s Bay, Lord & Taylor, Saks Fifth Avenue and Saks Off 5th chains, will buy Gilt Groupe Holdings for $250 million.
Gilt is an e-commerce site that serves some 9 million members with exclusive access to short-term “flash” sales on limited amounts of deeply discounted designer merchandise. The $250 million price tag is one-fourth the value analysts placed on Gilt at its peak. Though Gilt was one of the first online businesses to offer “flash” sales to its members when it launched in 2007, sales have stagnated as a host of competitors have copied Gilt’s formula and brick-and-mortar chains have begun launching their own flash sales.
Nevertheless, the deal provides big benefits for Saks, the retailer says. Millennials are big fans of the site — roughly 50 percent of its sales come from smartphones. HBC says it plans to integrate Gilt with its similarly positioned, 90-store Saks Off 5th off-price division, which is a key driver of sales growth for the company moving forward. HBC wants to open as many 25 new Saks Off 5th stores annually for the foreseeable future.
HBC expects the deal to beef up its 2016 fiscal-year sales to $500 million and contribute about $40 million in adjusted profit in 2017. “With this transaction we are further accelerating both HBC’s all-channel offering and Gilt’s growth,” said Gerald Storch, HBC’s chief executive. “Adding Gilt to our rapidly growing digital business is very exciting, and we see tremendous potential to enhance our mobile and personalization strategies by leveraging Gilt’s advanced capabilities.”
Gilt will establish concept shops within Saks Off 5th stores, and Gilt customers will be able to return purchases to physical Saks Off 5th units. Finding an efficient way to process returns has been a problem for Gilt, observers say.
“HBC and Saks Off 5th are the ideal home for Gilt and our members,” said Michelle Peluso, CEO of Gilt, in a prepared statement. “Our members will find having a brick-and-mortar presence valuable and a positive addition to the Gilt experience.” Peluso will stay on with the company through the transition, but Gilt will ultimately be run by Jonathan Greller, president of HBC’s outlets division.
One of HBC’s top rivals, Nordstrom, is finding success with a similar omni-channel tie-up. The Seattle-based retailer, which is also looking to grow its off-price business, acquired flash-sale site Haute Look five years ago and used it to help drive e-commerce sales at its Nordstrom Rack division.