Business

Belk exploring possibility of selling company

Customers wait in line to take part in Belk's Charity Day sale at South Park mall on Nov. 9, 2013. A sale of the company would mean Belk follows the long march of other family-owned department stores, including Marshall Fields and Hecht’s, that were sold to bigger companies.
Customers wait in line to take part in Belk's Charity Day sale at South Park mall on Nov. 9, 2013. A sale of the company would mean Belk follows the long march of other family-owned department stores, including Marshall Fields and Hecht’s, that were sold to bigger companies. CHARLOTTE OBSERVER FILE PHOTO

Charlotte may be losing another one of its iconic, homegrown retailers.

Belk, a third-generation department store chain that dates to the 1880s, confirmed Thursday that it has hired an investment bank to help it explore a possible sale or other “strategic alternatives.”

Once known for its acquisition-hungry banks, Charlotte has lately seen some of its most prominent companies become sellers. A little more than two months ago, shareholders of Matthews-based Family Dollar approved a sale to Virginia-based Dollar Tree, and last year grocer Harris Teeter was sold to Cincinnati-based Kroger.

Belk, which employs more than 1,300 in its corporate offices, said Thursday that it has begun a strategic planning process that it expects to conclude in the next several months. The retailer has hired blue-chip investment bank Goldman Sachs to assist in the effort.

“We are performing due diligence to carefully explore all options for our future,” Belk spokeswoman Jessica Graham said in a statement.

Over the decades, Belk’s retailing business has expanded to almost 300 stores in 16 Southern states, while family members have played a major civic role at home, including serving as mayor and chairing the Charlotte Chamber. In its hometown, the Belk name adorns a freeway, a college bowl game, the business school at UNC Charlotte and philanthropic initiatives.

The company’s decision to explore a sale comes as consumer spending continues to recover after the recession, but department stores face stiff competition from online and specialty retailers, such as Amazon and H&M. A sale would mean Belk follows the long march of other family-owned department stores, including Marshall Field’s and Hecht’s, that were sold to bigger companies.

“The U.S. was filled with family-owned department stores where the name of the owner was on the store,” said Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates Inc. “They’re almost all gone. They’re all part of Macy’s or someone else.”

Reuters reported that Belk is expected to contact major department stores such as Macy’s, Bon-Ton Stores and Nordstrom, as well as large private equity firms, to gauge their interest in a sale, which could be worth as much as $4 billion. Bon-Ton’s president and CEO, Kathryn Bufano, is the former president of Belk.

A person familiar with the company told the Observer that the most likely buyer for Belk would be a private equity firm, which would likely trim the company’s expenses and then take it public a few years later. It might be difficult to find a competitor willing to purchase Belk, especially if the buyer has to sell stores to allay antitrust concerns.

Chairman and CEO Tim Belk did a solid job of leading the company through the recession but still faces challenges growing the business, the person said. A sale could provide a successful exit for him and for family members who own shares in the company.

Davidowitz, the consultant, also said a private equity firm, or a handful of them, were likely buyers for Belk.

Bon-Ton, another regional department store company, has too much debt to justify the acquisition, Davidowitz said. He also thinks it will be problematic for other retailers to buy Belk because the local retailer “is a collection of all kinds of different stores and sizes and markets.” But he said not to rule anyone out.

“Anything is possible,” he said. “For all of those companies, Belk would be an hors d’oeuvres.”

Goldman Sachs declined to comment. Belk has a prominent connection to the investment bank: Director John Townsend is a former Goldman Sachs partner.

Belk’s long Charlotte history

Belk was founded in Monroe in 1888 by William Henry Belk, who named his first store the New York Racket. Leadership of the company has stayed within the family as Belk expanded through acquisitions and organic growth.

John M. Belk headed the company and was a four-term mayor in Charlotte, from 1969 to 1977. He was the city’s longest-serving mayor until Pat McCrory.

Most of Belk’s 41.2 million shares of stock are still owned by the Belk family.

Securities filings show Katherine Belk Morris as the largest shareholder, with almost 31 percent of the Class A shares, which hold the most voting power. Other major holders include Sarah Belk Gambrell, with 24.2 percent, Chief Operating Officer John Belk, with 10.1 percent and Tim Belk, with 9.8 percent. Some of the family’s ownership is held in different entities, of which they are trustees.

Last year, Belk’s sales totaled $4.1 billion, an increase of 1.8 percent over the prior year. Sales at stores open at least a year rose 1.5 percent for the year, and online sales grew 43.3 percent.

But the company’s profits dipped. Belk said its earnings totaled $146 million for last fiscal year, a 7.8 percent drop from the year before. The company attributed the decline to Belk’s investments in e-commerce and remodeling stores.

The company recently said it is laying off 111 employees at its e-commerce distribution and fulfillment center in Pineville as it expands similar operations in Jonesville, S.C.

Although the stock doesn’t trade on the New York Stock Exchange or other major exchanges, Belk’s shares trade over the counter, and the company reports its quarterly results and other financial details like a publicly traded company. In over-the-counter trading Thursday, Belk’s Class A shares rose more than 57 percent, to $78.

Key facts about Belk

▪ Headquarters: 2801 W. Tyvola Road

▪ Employee count: 1,300 at headquarters, 23,000 companywide

▪ 2014 sales: $4.1 billion

▪ Number of stores: 297

▪ Founded: 1888, in Monroe

Related stories from Charlotte Observer

  Comments