The gamecock. (Columbia, S.C.) 1908-2006, April 12, 2006, Page 8, Image 8
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
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