CHARLOTTE, N.C. — Belk Inc. built itself into the largest privately held U.S. retailer by providing moderately priced apparel in small towns across the South and Southwest.
Now, after paying a total of $907 million to purchase and rename both the moderate-to-better Proffitt’s/McRae’s and the more upscale Parisian chain from Saks Inc. within 13 months, Belk is trying to convince consumers and the industry that it can play in the big leagues.
Belk officials concede that a lengthier period between acquisitions would have made the transition easier but argue that the opportunities for deeper penetration in existing markets and inroads into new ones, including urban areas such as Atlanta, Birmingham, Ala., and Jacksonville, Fla., were too good to pass up. The company added 47 Proffitt’s/McRae’s units and 27 Parisian stores to give it a total of 300 units with an estimated $3.15 billion sales in 2006.
Like Federated Department Stores, which is renaming itself the Macy’s Group, Belk has discovered that absorbing a regional chain, especially one like Parisian with exclusive high-end brands, customized service and a tradition that generates consumer loyalty, can be a tough proposition.
“It’s like telling your children that you’re remarrying and changing their names,” said Bob Robicheaux, executive director of marketing and industrial distribution programs at the University of Alabama at Birmingham. “Parisian had a strong image and name that was upheld during the Saks ownership. These stores [Belk and Parisian] are not identical twins. Their challenge is to preserve and build an image.”
Belk, founded by William Henry Belk in 1888 in Monroe, N.C., is now managed by a third generation: Thomas “Tim” Belk Jr. is chairman and chief executive officer; H.W. McKay Belk is co-president and chief merchandising officer, and John “Johnny” Belk, is co-president and chief operating officer. The Belks declined to comment on the changes in their business.
Sitting in a conference room at Belk headquarters here, a spokesman, Steve Pernotto, senior vice president, human resources, expressed confidence that the retailer will succeed.
“If someone said five years ago that Belk would be number 23 on the top 100 hottest retailers of 2006 [as cited by Stores magazine, based on a 17.7 percent year-to-year sales gain], I’d have said they were crazy,” Pernotto said. “Belk is changing. We’re capable of meeting customers’ needs, depending on the attributes of local markets, just like other big stores do. We can adjust accordingly.”
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In the last year, however, Belk has hit a few bumps when trying to convince local markets that it can make the grade.
Parisian, founded in 1887 in Birmingham, had 15 of its 27 stores in Alabama, including five Birmingham units in high-income areas that targeted the city’s most affluent customers.
After acquiring Parisian in August and announcing plans to convert all Parisian stores to the Belk nameplate in October, developer Bayer Retail Co. filed a lawsuit to keep Belk out of The Summit, its upscale Birmingham open-air mall. Bayer contended that Belk didn’t meet terms of the 21-year lease Parisian signed in 1996 requiring it to operate a “first-class retail fashion department store.” Essentially, Bayer told Belk the chain wasn’t good enough to be in the center with Saks, Anthropologie and other high-end players.
David Silverstein, principal, Bayer Properties, said that initially Bayer wasn’t sure what kind of store Belk would operate and wanted assurances that the retailer would maintain a luxury store.
“We respect Belk’s operations,” Silverstein said. “We know their Charlotte store is wonderful, but the Alabama consumer hasn’t had that experience.” Silverstein said Bayer has had positive discussions with Belk and hopes the case will be settled out of court.
Belk would not comment on the lawsuit but is going forward with plans for a 50,000-square-foot expansion of The Summit store. It will become one of four luxury flagships, along with the Phipps Plaza Parisian in Atlanta and the Belk at Crabtree Valley Mall in Raleigh, N.C.; the prototype will be Belk’s flagship at SouthPark mall in Charlotte.
With its marble floors, spacious aisles and extensive cosmetics and accessories areas, the Charlotte store is more like Nordstrom or Neiman Marcus than the moderate Belk units that serve small towns.
Customers are pampered with in-store makeovers from prestige cosmetics brands — Chanel, Bobbi Brown and Mac, as well as Clinique, Estée Lauder and Lancôme. Personal shoppers help them navigate designer/bridge areas, with offerings from Marc Jacobs, Ellen Tracy, St. John and Dana Buchman.
Contemporary apparel, never Belk’s strong suit, is well developed here. In-store shops for Free People and Lucky Brand have theatrical lighting, signage and dramatic visuals. Videos for Kenneth Cole run on plasma-screen TVs and lines include Betsey Johnson, Cynthia Steffe and denim from Joe’s Jeans and Seven For All Mankind.
“Belk dresses up quite well,” said Mark Vitner, senior economist with Wachovia Corp. in Charlotte. “Parisian was a good store, but it wasn’t Saks or Nordstrom. If Belk comes in with anything like its Charlotte flagship, they’ve done it….Belk can now take the role that Rich’s occupied before it was bought by Macy’s. They can be more upper end but still maintain the understanding of Southern culture, communities, the Southern flair.”
Belk has hired a bridge/designer buyer from Parisian to expand bridge areas in its four flagships. Lines that Belk will expand include Karen Kane, Lilly Pulitzer, Juicy Couture and Lauren, Pernotto said. In accessories, high-end bags from Kate Spade, Coach and Brighton will grow into the flagships.
That should please Birmingham consumers like Teta Spencer, 30, an advertising sales executive who buys most of her wardrobe at Parisian’s Summit store. She said she can’t find lines such as Trina Turk, Tahari and BCBG anywhere else in town.
“In Birmingham, there’s not much of a selection. Without Parisian, I’d have to go to Atlanta,” she said. While she’s never shopped Belk, she feared that her favorite store would be downgraded.
“I hope they keep it like Parisian,” she said. “It’s the brands that mean the most to me.”
Along with the luxury flagships, Belk will identify 30 to 40 units as “premium” or better stores and will upgrade with many of the same bridge and contemporary vendors, depending on market demographics, household income and other factors, Pernotto said. Before the Parisian acquisition, about 30 Belk stores carried bridge apparel.
“We were already heading in a better direction before the merger, and now we’ll add Parisian into that,” Pernotto said.
Belk’s shift toward better goods is part of its bigger strategy of addressing local markets. While bridge and contemporary will expand, Belk is not forsaking its moderate identity, Pernotto said. The majority of stores will continue in the moderate-to-better realm in small-town America.
“Our core mission is still as a department store with branded, private label, moderate, upper-moderate apparel and home furnishings in stores from 50,000 to 280,000 square feet,” Pernotto said. “Our customer demographic is a female in her late 20s to late 50s, with a $45,000 to $100,000 income, buying for herself and her family.”
Belk conceded that Parisian had greater expertise in shoes and hired David Niri, Parisian’s general merchandise manager, to incorporate training, management, stockroom and compensation techniques to grow Belk’s shoe departments.
The retailer also praised Parisian’s focus on service and, like competitors, sees it as crucial to customer loyalty. With plans to get selected vendors to help train and motivate Belk’s sales staff, the retailer is incorporating Parisian techniques, which also include having sales associates send personal notes and other special touches that build relationships with key customers.
But for all Parisian’s strengths, Belk executives stress the many things Belk has to offer from a management, operations and supply-chain standpoint to its ability, as a family-owned private company, to make independent decisions.
“We can make investments not just to please Wall Street but for the health of the business,” Pernotto said.
Now, Belk executives are doing all they can to please Birmingham, where it faces the Bayer Properties lawsuit. Co-president McKay Belk has met with civic leaders and local charities, assuring them of the company’s commitment to the community. He described the deal as “a blending of the two chains, rather than a replacement of one over the other,” according to The Birmingham News.
“One of the great things about a merger or acquisition is, you have the opportunity to learn new ways of doing things and you can see how another organization has done something differently, and many times it is better than our own organization,” he told the newspaper. “Likewise, there are many things that we do that are different that we feel might improve things.”