Saks Off 5th Will Become $1 Billion Standalone Online Business

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The owner of Saks Fifth Avenue plans to separate the e-commerce business of its discount chain into a standalone company, the latest move to break up the operations of a brand synonymous with luxury apparel.

A split of Saks Off 5th will allow the new company to better tailor its investments for the online business, said Paige Thomas, who has run the off-price brand since early 2020 and will become chief executive officer of the e-commerce company. HBC will retain the brick-and-mortar stores.

The breakup comes about three months after HBC took a similar step to separate the online operations of the higher-end Saks Fifth Avenue business.

The moves highlight the significant steps retailers are taking to adapt as the world emerges from a pandemic that has reshaped consumers’ buying habits, particularly in the apparel market. While online revenue for off-price stores such as Nordstrom Rack and TJX Cos. Inc. have historically lagged in-store sales, the pandemic has given e-commerce a boost as people shop from home.

With some other discount-chain competitors mostly avoiding the web, Saks Off 5th has “a huge opportunity” to grab share in the online market, Thomas said in an interview. There’s “no question that Covid has created the seismic shift to digital.”

Alongside the split, venture capital firm Insight Partners led a $200 million equity investment into the Saks Off 5th e-commerce business, valuing the standalone company at about $1 billion, according to a statement Monday. Insight Partners previously invested in the online operations of the upscale Saks business.

HBC, which is also the private holding company for Canadian department-store operator Hudson’s Bay, will place the 105 brick-and-mortar stores of Saks Off 5th into wholly owned entity called O5. Customers likely won’t notice any changes, the company said, since the online and in-store operations will continue to coordinate. For instance, returns will be accepted by either business.

“The customer experience actually doesn’t change, and if anything only gets better,” Thomas said.

Rob Brooks, who previously served as chief customer officer for Saks Off 5th, will become president of the brick-and-mortar O5 operations.

©2021 Bloomberg L.P.

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