Stefan Kaluzny is on the verge of adding the 297-door Belk Inc. to his retail empire.
Sources said Kaluzny, managing director of private equity firm Sycamore Partners, is set to reach a deal to buy control of the company next week. Representatives for both sides declined to comment.
That would end 127 years of family ownership at the chain, which serves 16 Southern states and is generally viewed as a well-run company operating in a challenging segment of the market and squaring off with national chains such as Macy’s Inc., J.C. Penney Co. Inc. and Kohl’s Corp.
It’s not clear what role the Belk family would have in the company following the deal.
The retailer is led by chairman and chief executive officer Tim Belk — grandson of founder William Henry Belk — and members of the extended Belk family control the stock. The retailer got its start with $750 in savings, a $500 loan from a local widow and about $3,000 worth of goods taken on consignment from a bankrupt store.
Belk grew dramatically, but still finds itself squaring off with giants in a tough market.
In April, Belk said it hired Goldman Sachs as part of a strategic review that could entail a sale of the company. Sources said the retailer’s initial queries in the market were for a partner who would buy a minority stake.
And while the deep-pocketed investors Bain & Co. and KKR took a look, Sycamore prevailed. A proposed price could not immediately be learned, but sources previously said the company might fetch as much as $3.5 billion.
It will be a big deal, even for Kaluzny, who’s been in the thralls of a retail acquisition spree since 2012, having scooped up The Talbots Inc., Hot Topic Inc., Coldwater Creek’s intellectual property, 330 Family Dollar stores and, just last week, Germany’s EMP Merchandising Handelsgesellschaft.
Belk owns about a quarter of its stores and that could be a source of funds for Sycamore. Hudson’s Bay Co. and Sears Holding Corp. have recently been making headlines by unlocking some of the value in their real estate portfolios.
Sycamore has more than $3.5 billion in capital under management. But the Charlotte, N.C.-based Belk logged sales of $4.11 billion last year, a rise of 1.8 percent. Profits fell 7.8 percent as the company pushed money into its stores, e-commerce operations and infrastructure.
The 2008 recession served as something of a wake-up call for the understated, quiet company, which has been doing some soul-searching ahead of the sale process.
“My Uncle John used to say, ‘Change before you need to,’” Tim Belk told WWD in 2013.
Uncle John was the late John Belk, a gregarious figure who ran Belk as ceo for 50 years and simultaneously served as mayor of Charlotte from 1969 to 1977.
After the recession, Belk set itself on a new course trying to serve customers who had moved away from discretionary purchases while encouraging more calculated risk-taking among its leadership.
In tandem with its 125th anniversary in 2013, the company set out to boost sales to $6 billion within five years while growing earnings 10 percent annually.
But change is coming faster than ever in retail. The department store sector has consolidated significantly, malls have seen traffic decline sharply, shoppers are putting more money into gadgets and digital services and e-commerce is pushing stores to spend heavily, reworking to adopt an omnichannel stance.
Ultimately, the Belks could be choosing a good time to cash out. In addition to those seismic changes in retail, the getting is good.
The stock market is close to its all-time highs — the time when typically the biggest deals get done as owners try to sell at the peak. Belk’s stock is relatively closely held and not trading on the major exchanges, but the company’s valuation would still be seen in the context of the broader market.
And by taking advantage of the high and trading now, Belk finds itself in good company. Neiman Marcus’ private equity owners just floated a trial balloon and listed the retailer for an initial public offering.