FINANCE

Hudson’s Bay Company accelerates omnichannel with Gilt Groupe purchase

BY Mike Troy

Leading department store operator Hudson’s Bay Company confirmed months of speculation and agreed to pay what appears to be a modest sum to acquire online luxury retailer Gilt Groupe.

Hudson’s Bay, which operates 470 department stores including Saks Fifth Avenue and the Off 5th discount format, said it agreed to pay $250 million for Gilt in a deal that will add $500 million to 2016, $40 million in adjusted operating profit by 2017 and countless synergies to leverage the combined companies’ infrastructure and customer databases.

Hudson’s Bay CEO Jerry Storch said the deal will accelerate the department store operators’ omnichannel offering and fuel Gilt’s growth. Gilt has more than nine million customers who registered to access the company’s online site focused on offering discounted luxury goods and Hudson’s Bay plans to leverage that popularity by integrating Gilt departments in its Saks Off 5th stores.

“We plan to continue to foster Gilt’s culture of innovation, which has helped create a strong brand with a loyal and devoted millennial following,” Storch said. “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.”

Some of the immediate growth opportunities the company envisions include simply growing Gilt’s underlying business but also revenue synergies from accepting Gilt returns at Saks Off 5th stores and growing Gilt’s membership by leveraging HBC’s customer base. Meanwhile, opportunities for revenue growth at Saks Off 5th include increased customer traffic to stores from Gilt customers making returns and sales to customers visiting Gilt concept shops inside Saks Off 5th locations. Opportunities for expense savings and operational efficiencies from combining the businesses include reduced shipping costs, increased purchasing power, and shared inventories across Gilt and Saks Off 5th, according to the company.

“HBC understands our proposition and is committed to positioning our business for further success. Our members will find having a brick-and-mortar presence valuable and a positive addition to the Gilt experience,” said Michelle Peluso, Gilt’s CEO. “We are excited for our future and confident that we have the right team in place to continue to innovate the shopping experience and grow Gilt.”

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Hudson’s Bay Company acquires Gilt Groupe

BY CSA STAFF

Leading department store operator Hudson’s Bay Company confirmed months of speculation and agreed to pay what appears to be a modest sum to acquire online luxury retailer Gilt Groupe.

Hudson’s Bay, which operates 470 department stores including Saks Fifth Avenue and the Off 5th discount format, said it agreed to pay $250 million for Gilt in a deal that will add $500 million to 2016, $40 million in adjusted operating profit by 2017 and countless synergies to leverage the combined companies’ infrastructure and customer databases.

Hudson’s Bay CEO Jerry Storch said the deal will accelerate the department store operators’ omnichannel offering and fuel Gilt’s growth. Gilt has more than nine million customers who registered to access the company’s online site focused on offering discounted luxury goods and Hudson’s Bay plans to leverage that popularity by integrating Gilt departments in its Saks Off 5th stores.

“We plan to continue to foster Gilt’s culture of innovation, which has helped create a strong brand with a loyal and devoted millennial following,” Storch said. “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.”

Some of the immediate growth opportunities the company envisions include simply growing Gilt’s underlying business but also revenue synergies from accepting Gilt returns at Saks Off 5th stores and growing Gilt’s membership by leveraging HBC’s customer base. Meanwhile, opportunities for revenue growth at Saks Off 5th include increased customer traffic to stores from Gilt customers making returns and sales to customers visiting Gilt concept shops inside Saks Off 5th locations. Opportunities for expense savings and operational efficiencies from combining the businesses include reduced shipping costs, increased purchasing power, and shared inventories across Gilt and Saks Off 5th, according to the company.

“HBC understands our proposition and is committed to positioning our business for further success. Our members will find having a brick and mortar presence valuable and a positive addition to the Gilt experience,” said Michelle Peluso, Gilt’s CEO. “We are excited for our future and confident that we have the right team in place to continue to innovate the shopping experience and grow Gilt.”

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J.C. Penney overcomes warm weather with omnichannel

BY CSA STAFF

Less than 12 hours after Macy’s shared bleak holiday results, J.C. Penney said enhanced digital capabilities helped it to produce strong holiday season same store sales growth which allowed the company to reaffirm its full year profit forecast.

J.C. Penney said same store sales for November and December increased 3.9% on top of a prior year increase of 3.7% and confirmed that it would achieve earlier financial targets of $645 million in earnings before interest, taxes, depreciation and amortization (EBITDA) and generate positive free cash flow. Barring a major fall off in January sales, the 3.9% increase through November and December has J.C. Penney well positioned to achieve its full year outlook which called for same store sales growth of 4% to 5%, considering comps during the first, second and third quarters increased 3.4%, 4.1% and 6.4%, respectively.

"Despite unprecedented warm weather that significantly affected apparel sales across the company, our focus on private brands, enhanced omnichannel execution and compelling gift giving selection resulted in strong holiday sales,” said J.C. Penney CEO Marvin Ellison. “I am especially pleased with the accelerated comp sales improvement from November to December, including record online sales for the company during the holiday season.”

J.C. Penney’s affirmation that it will achieve performance targets shared early in the year is not remarkable on the surface. However, the results take on greater significance when viewed against a backdrop in which record warm temperatures throughout the holiday season cast considerable doubt about other retailers’ ability to achieve sales targets. Also making J.C. Penney’s performance noteworthy is that it comes on the heels of hugely disappointing news from Macy’s. The day before J.C. Penney’s announcement on Jan. 7, Macy’s said its November and December same store sales declined 4.7%, worse than earlier guidance which called for a decline of 2% to 3%, and lowered its full year profit forecast.

J.C. Penney can breathe a sigh of relief that it appears to have weathered the holiday season better than others, but Ellison noted the company’s transformation remains a work in progress as it looks to build on omnichannel progress evident during the holidays.

"Although we have much work to do, our strengthened omnichannel capabilities enabled our supply chain network to process millions of jcp.com orders this season, supported by 250 stores across the country that helped fulfill online orders using in-store inventory,” Ellison said. “With this level of selection, we saw more online customers take advantage of our in-store pick up option available at over 1,000 JCPenney stores nationwide. We look forward to capitalizing on this digital progress through 2016.”

The company will report its fourth quarter and fiscal 2015 results on Feb. 26.

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