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· Posted on
October 20, 2021

If you love something set it free cos it could be valued at US$6 billion like Saks' e-comm site

Saks Fifth Avenue is a US luxury department store chain, which first opened up in Washington D.C. way back in 1867...yah, it's that old.

What's the key learning?

  • Saks has decided to split its e-comm biz into a whole separate entity (aka a carve out) to let it flourish on its own
  • Now, Saks' online store is going public, seeking a valuation of US$6 billion...talk about cashing in
  • A carve-out is when a company cuts out a business unit (ie saks.com) and sells a stake of it to outside investors.

Background: Saks Fifth Avenue is a US luxury department store chain, which first opened up in Washington D.C. all the way back in 1867. Yah, it's that old. But it didn't launch its online store until 2000.

What happened: And Saks' online store took off. We're talkin' US$1 billion in annual sales. Fast-forward to March 2021, and Saks decided to split its e-comm biz into a whole separate entity (aka a carve out) to let it flourish on its own (naw, isn't that sweet).

What else: Now, Saks' online store is going public, seeking a valuation of...*checks notes*...US$6 billion. Talk about cashing in.

So what's the key learning?

💡A carve-out is when a company cuts out a business unit (ie saks.com) and sells a stake of it to outside investors. Businesses need to split off profitable business units in order to maximise their value.

💡Businesses will carve out a business unit because:

  • the unit is performing really well (relative to the rest of the business)
  • the unit is performing really poorly (and needs some love)

💡 We know online shopping is booming, and investors are drooling over e-commerce sites. But when saks.com is attached to not-as-profitable department stores (i.e. Saks Fifth Avenue), they're not as enticing. And if this works out, we could see something similar happen with Myer and DJs.

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