Hudson’s Bay Co. sees its purchase of Gilt Groupe as the ticket to advancing growth across all channels and banners, and not just as a relatively inexpensive deal to boost online sales overnight.

That’s the message from HBC’s chief executive officer Jerry Storch, who in an interview Thursday, just after HBC said it was purchasing the $550 million Gilt Groupe for $250 million, outlined the game plan for integrating the e-tailer.

“Gilt is a fantastic brand — a leader in the e-commerce fashion space. Both the brand and customer fit very well with Saks Off 5th,” Storch told WWD. “On the revenue side, Saks Off 5th will help grow Gilt and Gilt will help grow Saks Off 5th.”

HBC will continue to operate Gilt essentially as it is, though there will be certain integrations to achieve savings and synergies.

“Absolutely Gilt will be Gilt. It’s a fantastic brand. People love it,” Storch said. “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.”

Jonathan Greller, president of HBC outlets, will be overseeing Gilt, with various functions of Gilt, including IT, reporting into HBC’s shared services arm.

Storch said there are opportunities to improve the Gilt business by combining it with bricks-and-mortar. “One is to provide for physical returns. Starting in February, customers will be able to start returning Gilt products at Saks Off 5th,” Storch said. “A major impediment at Gilt has been the difficulty of making returns.”

Secondly, “we will be opening Gilt concept stores inside Saks Off 5th stores” for buying and returning Gilt products. “Gilt will be physically embodied inside the Saks Off 5th stores.” Storch said details of the concept stores and where they are opening will soon be revealed.

The Gilt shops will help bring extra customer traffic to Saks Off 5th, which will become an outpost for signing up Gilt members, Storch said. “Right now, the only way to source memberships is online. With Saks Off 5th, we can get Gilt memberships much more easily.”

The ceo characterized Gilt as “a leader in mobile commerce, which is the most rapidly growing part of the Internet, far outpacing desktop growth. Over half of Gilt’s sales are done on mobile. There is a skill set there that we will be leveraging across our banners. Gilt is expert in personalization, which is one of the most important technologies for improving conversions.”

HBC will extend the Gilt City component of the Web site possibly to other HBC Web sites, Storch said. Gilt City posts a range of services and experiences, such as spas, restaurants and Pilates classes. Gilt specializes in fashion and accessories for women, men, children and home decor.

Expense savings are seen through operational efficiencies attained by combining the businesses including reduced shipping costs, increased purchasing power and shared inventories across Gilt and Saks Off 5th.

The purchase of Gilt extends HBC’s string of acquisitions of the last several years, including Galeria Kaufhof last year, Saks Fifth Avenue in 2013 and earlier, Lord & Taylor and Hudson’s Bay department stores.

Storch declined to comment on how Gilt was performing, but in an indication of pressures on the business, the brand last fall laid off 45 staff members as part of a restructuring of operations to be cash-flow positive. In recent seasons, Gilt has been working hard to increase its international business.

Storch disputed the idea that the flash-sale format has been losing popularity. “There is more flash business being done than ever before,” he said, citing Best Buy and Saks Fifth Avenue as well as some competitors that have flash sales on their Web sites.

The purchase, expected to close Feb. 1, will contribute about $500 million to HBC’s 2016 sales and about $40 million of adjusted earnings before interest, taxes, depreciation and amortization by 2017.

Reports that the two companies were in talks began circulating in mid-December. Gilt was launched in 2007 and had rapid growth through the Great Recession when it and similar flash-sale sites were able to snap up excess inventory and develop significant scale. Gilt expanded into women’s and men’s apparel and accessories and subsequently added travel, home furnishings and food. Kevin Ryan cofounded the firm and led it as ceo from 2010 to 2013, eventually passing the baton off to Michelle Peluso.

But as retailers gained better control over inventories — and began opening their own off-price stores — growth of the flash-sale model began to slow. The price HBC is paying for Gilt represents a major drop for the once high-flying firm. Last year, Gilt was believed to be working with Goldman, Sachs & Co. toward an initial public offering and at its peak had reached the elusive “unicorn” status, being valued at $1 billion. General Atlantic, the private equity company that has a stake in Tory Burch, has invested in the company during three rounds, mostly recently giving it $50 million in a February private placement. Other investors include Goldman Sach’s merchant banking division and Partners.

Other flash sites have been sold, but not at the high valuations that once seemed possible. Nordstrom paid $270 million for HauteLook in February 2011, while Groupon last year paid just over $43 million in cash to purchase fashion flash-sale site Ideeli.

The Gilt purchase represents the first acquisition HBC has made in the purely digital space. It has up until now been focused on brick-and-mortar purchases in order to leverage the real estate.

“We see tremendous potential to enhance our mobile and personalization strategies by leveraging Gilt’s advanced capabilities,” said Storch. He added that Gilt will help accelerate the growth of HBC’s digital business across all of its banners, which include the Hudson’s Bay, Saks Fifth Avenue, Lord & Taylor and Kaufhof department stores.

Said Michelle Peluso, ceo of Gilt, “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.”

HBC expects to fund the $250 million purchase price plus transaction costs using cash on hand.

Scotiabank is acting as exclusive financial adviser to HBC. Willkie Farr & Gallagher LLP acted as M&A legal counsel, and Stikeman Elliott LLP served as company legal counsel. Lazard is acting as exclusive financial adviser to Gilt and Wilmer Cutler Pickering Hale and Dorr is acting as its counsel.

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