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Public Notices

April 23, 2014

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Belk, Inc. Buys Proffitt's Stores Here, Elsewhere

Originally published:
Last modified: 2009-08-03 17:05:06
 


NEW YORK (AP) - In its first step in the breakup of Saks Inc., the Birmingham, Ala.-based department store operator on Friday said it is selling its Proffitt's and McRae's department stores to privately held retailer Belk Inc. for $622 million in cash as it mulls options for its stores across the northern United States.

(Among the stores that Belk Inc. has purchased is the Proffitt's store here in the Greeneville Commons, the companies have announced.

(Belk, Inc. said that besides the Proffitt's store in Greeneville, it also is buying the Proffitt's stores in these other Tennessee locations: Athens, Chattanooga, Cleveland, Johnson City, Kingsport, Knoxville, Maryville, Morristown and Oak Ridge, as well as the Proffitt's store in Bristol, Va.

(A decade ago, in March 1995, Proffitt's Inc., announced the acquisition of a majority interest in the capital stock of Parks-Belk Company.

(Parks-Belk Company then operated four Parks-Belk department stores that were located in Greeneville, Morristown, Kingsport and Johnson City.

(The Parks-Belk Company has been part of the Northeast Tennessee retail scene since 1928, when the company's first store opened in Johnson City.-Eds.)

Will Operate 275 Stores

Upon completion of the transaction, which has been approved by the boards of directors of both companies, Belk, based in Charlotte, N.C., will operate a total of 275 stores in 14 states with an estimated annual sales volume of $3.15 billion.

The acquisition - which includes 22 Proffitt's stores and 25 McRae's stores, all managed out of Proffitt's original headquarters in Alcoa, Tenn., in suburban Knoxville - is expected to solidify Belk's regional strength in the Southeast, where it already operates 228 units in 14 states.

Saks is severing the original stores on which former Tennessee legislator R. Brad Martin, of Memphis, built the Saks Inc. conglomerate, beginning with the private buyout of the four-store, family-owned Proffitt's chain in 1984. After going public, the company grew quickly by buying up other regional retailers, starting with the then-28-store McRae's chain of Jackson, Miss., in 1994.

Belk said it will close the Proffitt's-McRae's headquarters in Alcoa by the end of September. Corporate employees will be offered positions with Belk or severance pay.

Saks, which reportedly made plans last week to shed it midprice stores in two geographic clusters, also said it will hold onto its Parisian stores and continue operating Saks Fifth Avenue, Saks Off 5th and Web site Saks.com. By selling its chain in pieces, Saks Inc., which has been struggling with lackluster earnings, is hoping to get a better return on its investment.

Saks' northern stores, which are already managed together, include Carson, Pirie Scott, Bergner's, Boston Store, Younkers and Herberger's chains.

The deal also includes the assumption of approximately $1 million in capitalized lease obligations and the assumption of certain other ordinary course liabilities. Belk will also assume operating leases on leased store locations.

The 47 Proffitt's/McRae's stores being sold are located through 11 Southeastern states and generated revenues of approximately $700 million in 2004.

The deal unravels a 1998 merger of Saks Fifth Avenue with Proffitts Inc., combination that hasn't exactly helped create big cost savings, resulting in disappointing earnings.

For the year ended Jan. 29, Saks earned $60.9 million, or 42 cents per share, compared to $80 million, or 56 cents per share, the year before.

"Over the last several years, we have dedicated significant management effort, investment, and resources into strengthening our (Saks Department Store Group) franchises and positioning the business for future growth," said Martin, Saks chairman and chief executive, in a statement. "As a result, we believe it is appropriate to divide the (Saks Department Store Group) businesses into distinct enterprises and permit each to have its own focused future."

The fate of Saks Fifth Avenue is still yet to be determined. On one hand, the proceeds of Saks' midprice division could be reinvested in Saks Fifth Avenue, whose performance has trailed Neiman Marcus.

Or it could just sell the Saks Fifth Avenue division, which is hoping to get a high premium, given that luxury is currently one of the best-performing retailing categories.
 
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