Saks sold to retail chain

Aug 01, 1998 9:30 PM  By

Less than two weeks after announcing that it was exploring “strategic alternatives,” upscale retailer Saks Holdings was sold to retail chain Proffitt’s for about $2.1 billion in stock. The $2.3 billion Saks includes the Folio catalogs of high-end apparel and home decor products.

The companies expect the deal to be approved by the end of 1998, at which time Proffitt’s will change its corporate name to Saks Inc. The $3.6 billion Proffitt’s department store chains include Herberger’s and Carson Pirie Scott. The Folio mail order division is Proffitt’s first foray into cataloging. In a statement, Proffitt’s chairman/CEO R. Brad Martin noted, “The database management, telemarketing, and distribution infrastructure of…Folio will be leveraged across Proffitt’s existing customer base. In addition, this infrastructure can provide us with growth opportunities in the electronic commerce arena.”

Perhaps Proffitt’s interest in Folio will spur growth for the catalog division. Folio’s $80.5 million 1997 revenue represented a meager 1.8% increase over the previous year, compared to a 6.5% increase in 1996.

Retail growth was clearly Saks’ main focus. Last year, for instance, Saks spent $179 million in capital to increase its retail square footage 12%. And while its 1997 annual report was filled with forward-thinking speak about enhanced service initiatives, extending the brand to new customer segments, and a retail growth strategy, nowhere did it talk about growth plans for the catalog. Where the catalog was mentioned, it was referred to as one of the company’s six retail formats and part of its “store” strategy.

Pete Michielutti, executive vice president/chief operating officer of general merchandise cataloger Fingerhut, resigned suddenly on June 25. Under Michielutti, who had been running the day-to-day operations since May 1997, Fingerhut’s stock vaulted from $14.75 on May 7, 1997, to $31.81 on June 24, 1998.

Michielutti says his departure stemmed from Fingerhut’s May 1998 hiring of Will Lansing as president. While he speaks highly of Lansing, who is a former General Electric vice president of business development, Michielutti says he didn’t like seeing his job divided between Lansing and him. “Will is a very capable guy, and my thought was that it wasn’t necessary to have both of us there for Fingerhut to achieve its goals,” Michielutti says. “So I decided that I wanted a bigger challenge.”

Lansing doesn’t deny Michielutti’s reason for leaving. “I wanted to divvy up the business a bit, wherein Pete was going to wind up with a smaller part,” Lansing says. “He was going to continue running the catalog operation, but the Internet and affinity marketing units would no longer report to him. But it was his call to go; we didn’t kick him out or anything, and in fact, we would have liked him to stay.”