News

Pittsburgh's struggling Downtown retail corridor could be a beneficiary of Saks Inc.'s decision to sell two mid-priced department store chains, Proffitt's and McRae's, to Belk Inc. for $622 million, analysts said Friday.

But that may depend on what the Birmingham, Ala.-based retailing company decides to do with its upscale Saks Fifth Avenue store here.

The sale of the underperforming Proffitt's and McRae's units to privately held Belk, of Charlotte, N.C., announced yesterday, will give Saks funds needed to reduce debt and invest in its other stores, including the Saks Fifth Avenue chain.

However, the company last year announced the closings of 10 Saks Fifth Avenue outlets and three Saks Off Fifth stores.

It has declined comment when asked about the future of its store Downtown, where Lord & Taylor and Lazarus-Macy's department stores closed last year.

"I believe the Downtown store is doing well," said Steve Baumgarten, retail analyst at Parker/Hunter Inc. in Pittsburgh, adding that the closing of the Lord & Taylor store in November has likely sent more shoppers into Saks.

It is unlikely that Saks would close its Downtown store, he believes.

Baumgarten said he would not be surprised if Saks would expand its Downtown presence, with a likely location the abandoned 135,000-square-foot Lord & Taylor building.

"I believe this is a way they (Saks Inc.) can get more focused on their high-end stores, including your store in Pittsburgh," said Rusty Robinson, of the Robinson Investment Group in Nashville, Tenn.

Robinson, who helps manage about $115 million in assets, including 86,000 Saks shares, said Saks Fifth Avenue's mix of stores includes outlets in regional malls as well as in major city business districts.

Pittsburgh's downtown will more likely be affected by the proposed merger of the May Co., parent to Kaufmann's, with Federated Department Stores Inc., owner of the closed Lazarus-Macy's, than by Saks' situation, he said.

As reported, analysts have speculated that the $11 billion Federated-May merger, expected to be completed later this year, is likely to lead to Federated changing the name of the Kaufmann's brand, probably to Macy's, including its massive store here.

"Pittsburgh's Saks is a little bit small, but for the market they are in, I think it probably is appropriate," said Eric Frye, retail broker with the Grubb & Ellis Co. commercial real estate company Downtown.

Frye said Saks' customer traffic here probably has been hurt by the closing of Lazarus-Macy's and Lord & Taylor and other stores in the retail corridor in and around Fifth and Forbes avenues.

"But I think their (Saks') sales have been decent here," he said.

The 47 Proffitt's/McRae's stores being sold are located throughout 11 Southeastern states and generated revenues of approximately $700 million in 2004 for Saks. The mid-tier stores have also been caught between luxury stores like Neiman Marcus and discounters like Wal-Mart Stores Inc. and Target Corp., which offer low prices and have sharpened their merchandise.

Saks' Fifth Avenue Enterprise division, which consists of 57 Saks Fifth Avenue stores, 52 Saks Off Fifth stores, and Saks.com, has fared much better than the mid-price department store group, but still trails Neiman Marcus.

However, some analysts have speculated that Saks Inc. could eventually decide to sell the upscale chain anyway, hoping to get a premium price.

Staff writer Michael Yeomans, Bloomberg News and Associated Press contributed to this report.

• Most Read
• Most E-mailed
• Latest News