Saks.com, through a round of new financial transactions, has strengthened its liquidity and potential to grow its luxury e-commerce business.
WWD has learned that Saks.com LLC has closed on a syndicated $350 million, asset-based five-year revolving credit facility arranged by Bank of America NA, and a $115 million senior secured term loan arranged by Pathlight Capital LP, which is the sole debt on the books.
“Given our strong market position and the improving economic environment, Saks is poised to lead in luxury e-commerce,” Vince Phelan, the chief financial officer of Saks, said Wednesday. “These transactions and their favorable terms are a reflection of the strength of our business and capital position. Furthermore, this financing combined with cash we already have on hand ensures we have substantial liquidity and flexibility to execute on our strategic plans and build on the upward trajectory we are already seeing in our business.”
Saks said the asset-based revolving credit facility, undrawn at closing, remains available to the company for general corporate purposes or growth initiatives, if needed.
The funding should help saks.com compete in what’s become a vibrant, resilient sector with an escalating battle to win over fashion customers, between Mytheresa, neimanmarcus.com, Moda Operandi, Net-a-porter, Farfetch and Matchesfashion. E-commerce continues to show strong gains this year after enormous gains through the pandemic last year. The rate of gains should slow with shopper traffic already starting to return to malls and brick-and-mortar stores this spring.
In March, Saks Fifth Avenue was reengineered by its parent, the Toronto-based Hudson’s Bay Co., with a new business model, equity partner and stronger balance sheet, splitting the Saks Fifth Avenue store fleet and saks.com into separate companies. Insight Partners, a venture capital and private equity firm, made a $500 million minority equity investment in the Saks e-commerce business, valuing it at $2 billion.
A portion of the proceeds from the new term loan will be used to fund certain obligations to HBC, in connection with the company’s recent split of saks.com and the Saks Fifth Avenue stores into two companies, and the remaining amount will be available to Saks.
As stand-alone companies, Saks Fifth Avenue’s e-commerce business is now known as simply Saks. The 40-store Saks Fifth Avenue fleet is known as SFA, which remains wholly owned by Hudson’s Bay Co.
It’s expected that executives at the Saks dot-com business will up the spending on technology, marketing, contact centers and enhanced customer features such as personalization, styling services and shipping and return options. Last year, saks.com was re-platformed with Salesforce Commerce Cloud to capture more data on users, leading to messaging that furthers personalization. Men’s wear got its own homepage, which leads to a designated men’s section, and the overall look and feel of the website was upgraded.
Ultimately, transforming the Saks Fifth Avenue stores and e-commerce businesses into separate companies is a prelude to potentially spinning off the e-commerce operation into a public company, as WWD exclusively reported in January. An initial public offering for Saks e-commerce is appealing given the current high valuations on e-comm pure plays like Mytheresa and Farfetch. It provides a clearer view of the value of Saks Fifth Avenue assets — stores and website — and presents opportunities to continue to raise money.
Saks.com generates about $1 billion in annual sales. That’s roughly twice the volume of Mytheresa, which went public in January and saw its stock price quickly soar.
“This is just early days for online shopping, especially in luxury,” Richard Baker, governor, executive chairman and chief executive officer of Hudson’s Bay Co., said in an interview at the time of the reengineering of Saks. “There is an opportunity for luxury to triple its size online. No one really knows how retailing is going to play out. With this move, we are redefining the luxury shopping ecosystem.”
The transaction with Insight Partners “reinforces HBC’s ability to unlock significant value within our company’s assets,” Baker said.