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Belk shopping for more stores Leigh Dyer THE CHARLOTTE OBSERVER CHARLOTTE, N.C. — Buying its first major outside chain of stores has gone so well for Belk Inc. that the Charlotte-based company is shopping for more. In an interview last week, Belk president and chief operating officer Johnny Belk and David Stovall, chairman of Belk’s central division, said the integration of the former Proffitt’s and McRae’s chains into Belk has surpassed expectations for sales and profits. “We see this as a defining period in our history, that we’re learning to grow and acquire,” said Johnny Belk, grandson of the 118-year old company’s founder. Last year, Belk bought 47 Proffitt’s and McRae’s stores from Saks Fifth Avenue pa'rent Saks Inc. in a $623 million deal. Belk, the largest privately held department store chain in the country, now has 273 stores in 15 Southeastern states and nearly $3 billion in annual sales. Analysts — and some of Belk’s own employees — saw the acquisition as a bold move. “It (was) as big a challenge as the company itself has taken on, that I’m aware of, in at least the last 30 years or so,” said Stovall, who was charged with overseeing the integration of the new stores. In its year-end earnings report last week, Belk said its profits for the year — which included about six months of ownership of the former Saks chains — rose more than 10 percent to reach a record $136.9 million. Sales in stores open at least a year, generally considered the best indicator of a retailer’s health, rose 1.2 percent. Belk plans to continue opening new stores, with 10 already on the plate for the coming year. But now, acquisition is another significant growth strategy for the company, Johnny Belk said. A potential prospect is another Saks division that’s now for sale — Parisian, a chain of 39 stores in the Southeast and Midwest. They’re slightly more upscale than Proffitt’s and McRae’s were. Saks announced in January that it’s exploring a sale for Parisian, and Saks spokeswoman Julia Bentley said this week there have been no public updates on the process, which is expected to take several months. “We are always interested in opportunities,” Belk said. “Whether Parisian fits or makes sense financially, we have not gone far enough down that road (to say).” One reason Proffitt’s and McRae’s worked well, Belk and Stovall said, was that their stores were in Belk’s geographic territory. “Proffitt’s/McRae’s was manageable. It was (less than) one-third our size. It didn’t overwhelm us. It was a very similar business. It was very well run,” Belk said. “From a strategic point of view, those are the kind of acquisitions we want to look for.” Another reason is the two companies had a similar core customer: Women ages 35 to 55 who are working mothers, Belk said. And Belk worked carefully to win over the -“hearts and minds” of the Proffitt’s and McRae’s store employees, sending each a carnation and inviting them to cut ribbons as the stores officially opened as Belks last month, Stovall said. Consolidation is a trend in the department store industry, with the largest recent example being the merger of Federated, parent of Macy’s and Bloomingdale’s, with the May Co., parent of Hecht’s and Lord & Taylor. The industry is struggling as shoppers leave traditional department store-anchored malls for Wal-Mart and other discounters, online shopping and lifestyle shopping centers. Rritt Reemer. who heads Charleston-based market research firm America’s Research Group, wasn’t surprised the acquisition led to higher profits for Belk. That’s especially considering Belk shut down the 270 employee headquarters of Proffitt’s and McRae’s in Tennessee. “As they add stores, if they don’t add overhead, they’re probably in great shape,” Beemer said. But their challenge, Beemer said, will be sustaining profit growth as consumers continue to cool on department stores — for example, some analysts said this week’s department store March sales reports reflected lackluster receptions to spring clothing offerings. Beemer praised Belk’s strategy of opening its BGLH • 9 I ration ■ ^Software Workshop _ p/ \ fyj lay ^ II 12th 2:00pm / 'X,ens‘ons * I you are interested in improving retention %f new information and developing writing, conf^re^nsion and studying r/$}<ills, don’t miss out on this opportunity to frm® Inspiration® can be used for... ■ > P • Organizing research e™ • Writing papers and reports i • Professional and personal project planning ITOHfcSy (803)777-1099 djv4c V1”' BSE' ypmmi.iiM