Saks Fifth Avenue, the iconic high-end retailer, is looking to take its e-commerce unit public at a $6 billion valuation. According to sources and reporting from the Wall Street Journal, the company is already in talks with a variety of investment banks to find an underwriter.
Currently, Saks is owned by Hudson's Bay Company which is a privately-held, Canadian retail group. It operates and owns retail stores across Canada and the U.S. Hudson Bay is quite interesting as the company has been around even prior to Canadian independence and actually owned the fur trade in the colonies at one point. From there, it expanded into a variety of industries including oil and gas and healthcare before shifting its focus back to retail over the last few decades following its acquisition by Maple Leaf Heritage Investments.
Most recently, the company has owned and operated several well-known brands in addition to Saks like Lord & Taylor, Zellers, and Gilt Groupe. All of these were well-known, premium retailers that simply have failed to generate enough traction in today's e-commerce world. Further, they appealed to a small segment share of the market and failed to keep up with changing tastes. This isn't that unusual as there tends to be considerable turnover in the retail sector on a historical basis even though retail spending tends to keep making new highs.
Over the last couple of years, Hudson Bay has been shifting its focus to e-commerce as it already concluded that millennial shoppers prefer to purchase online and want a larger variety of options that are available in stores. CEO Helena Foulkes has remarked that the company could become irrelevant if it fails to adjust to these changing tastes.
Thus, it's not surprising that Hudson Bay has invested significantly in Saks' e-commerce operations and that it has been generating impressive growth and sales, especially during the pandemic. Saks also could see a boost in the coming year as people return to offices and once again start attending offices and parties which could spark sales of its expensive, designer items.
The IPO of Saks' e-commerce unit is certainly an effective way to better monetize the asset. It also shows confidence that Saks is generating significant momentum in terms of online sales. However, there remains considerable skepticism about whether $6 billion is an appropriate valuation given that the company was bought for $2.9 billion in 2016.