NEW YORK — Splitting up its department store group, Saks Inc. is said to be close to an agreement to sell Proffitt’s and McRae’s to Belk Inc.
People with knowledge of the situation said a tentative accord was reached earlier this week, though a purchase price could not be immediately determined. Saks is publicly held and would be required to disclose the sale when an agreement is completed and signed. Belk, based in Charlotte, N.C., is the largest privately held U.S. department store company.
An announcement is anticipated within the next week, perhaps as soon as today, financial and real estate sources said. Belk is said to have been eyeing Proffitt’s for quite some time. More recently, it began looking at McRae’s and Saks’ Parisian division, real estate sources in the department store sector said.
Neither Saks Inc. vice chairman Steve Sadove nor a Belk official would comment.
A deal for Proffitt’s and McRae’s would expand Belk’s retail influence in the Southeastern states where it already operates. Parisian, while considered the better name within the Saks department store group, has units in both the Southeast and the Midwest. A Belk acquisition of Parisian, however, would move Belk into the Midwest, a move that some real estate sources said didn’t appear to be in the cards.
Belk posted an 11.3 percent increase in net income to $124.1 million and an 8 percent boost in sales to $2.45 billion for the year ended Jan. 29. This compares with net income of $111.5 million on sales of $2.25 billion in the previous year. Belk opened 14 stores in 2004, adding 964,300 square feet, and completed eight renovations and three expansions.
Many people in investment banking, hedge fund and credit markets had expected a push by Saks for the sale of its entire department store group, and had placed a valuation of $2 billion to $2.5 billion for the entire operation. Saks has been looking for a buyer for the department store operation since January. Saks’ sale of Proffitt’s would represent the first step in an unraveling of the nameplates that Proffit’s Inc. built before it acquired Saks Holdings Inc. in September 1998. That purchase resulted in Proffitt’s changing its corporate name to Saks Inc. In addition to Proffitt’s, McRae’s and Parisian, the department store division includes the nameplates Bergner’s, Boston Store, Carson Pirie Scott, Club Libby Lu, Herberger’s and Younkers.
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