The deal will see Gilt Groupe shops pop-up in Saks location – giving the brand’s shoppers brick-and-mortar access.
By Leslie Picker. Source: New York Times.
Once emblematic of New York technology and innovation, Gilt Groupe has agreed to be acquired by Hudson’s Bay Company for a quarter of its private valuation.
Hudson’s Bay, the department-store retailer that owns Lord & Taylor and Saks 5th Avenue, plans to purchase Gilt for $250 million in cash, the companies announced on Thursday. That compared with the $1 billion valuation Gilt amassed in 2011.
Soon after Gilt was founded in 2007, it was hailed for revolutionizing fashion e-commerce through its flash sales, which accord shoppers a limited window of time to capture discounts on clothing and accessories. The model attracted scores of users, some of whom became less enthused by the deals over time, analysts say.
Hudson’s Bay is betting the deal will revive Gilt through a partnership with its Saks Off 5th. After the deal is completed, Gilt customers will be able to return merchandise at Saks Off 5th, which could bolster traffic in the outlet stores. The companies would also set up Gilt shops within Saks Off 5thstores, giving Gilt’s 9 million members access to brick and mortar.
Among all of Hudson’s Bay brands, the relationship with Gilt will be the strongest for Saks Off 5th, Jerry Storch, the chief executive of Hudson’s Bay, said in a phone interview, as both Gilt and Saks Off 5th offer luxury items at a steeply discounted price.
“The two most rapidly growing areas in retail today are Internet and off-price,” Mr. Storch said. “We think this is a marriage made in heaven.”
The deal was modeled after Nordstrom’s 2011 acquisition of HauteLook, a deal that paved the way for traditional retailers’ purchases of sites for private sales.
Retailers including Hudson’s Bay have been experiencing challenges, partially related to slower traffic churning in and out of their stores, as more customers shop online.
By bringing in Gilt, the Canadian department-store owner is looking to take advantage of the site’s digital gravitas. About 50 percent of Gilt’s orders are conducted through its mobile platform, and Hudson’s Bay wants to tap into those capabilities for the rest of its brands.
“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,” Mr. Storch said in the statement. “Adding Gilt to our rapidly growing digital business is very exciting and we see tremendous potential to enhance our mobile and personalization strategies by leveraging Gilt’s advanced capabilities.”
The companies said that after combining they would be able to reduce shipping costs and share inventory, as well as increase purchasing power.
The deal may contribute about $500 million to Hudson’s Bay’s fiscal 2016 sales, as well as $40 million in adjusted earnings before interest, taxes, depreciation and amortization by 2017, the companies said.
Scotiabank served at the financial adviser to Hudson’s Bay, while Lazard represented Gilt. Willkie Farr & Gallagher provided legal counsel for the acquisition, while Stikeman Elliott also offered the company legal advice. Wilmer Cutler Pickering Hale and Dorr provided legal counsel for Gilt.