Saks Fifth Avenue’s troubled experiment with online flash sales is ending almost as abruptly as it began.
The department store chain’s parent,
, is selling Gilt Groupe to Rue La La, according to the companies. The price is well below $100 million, said people familiar with the deal.
Hudson’s Bay paid roughly $250 million for the e-commerce site just over two years ago, a fall for the “unicorn” startup that venture capitalists once valued at more than $1 billion.
The move signals Hudson’s Bay’s willingness under new CEO
to exit money-losing businesses while its share price is under pressure and an activist investor is calling for the company to make better use of its real estate.
Gilt has weighed on Hudson’s Bay since its acquisition in 2016. Hudson’s Bay wrote down the value of the Gilt trade name by $63 million the quarter ended in February and said digital sales would have grown by 9% in the period—not the reported 2.8%—if Gilt had been excluded.
Gilt, which launched in 2007, and its peers were popular during the recession when designers needed to unload excess merchandise. But the flash-sales sites have struggled with increasing competition as well as changes to the way luxury goods are sold. Gilt and several of its rivals, including Zulily and Fab.com, have changed hands in recent years at a fraction of their onetime billion-dollar valuations.
Rue La La is owned by Kynetic, a holding company founded by
The e-commerce entrepreneur, who sold a previous startup to
has wanted to own Gilt since 2009 and was a competing bidder to Hudson’s Bay the last time Gilt changed hands, a person familiar with the situation said.
The combination of the two websites will create a business with roughly $1 billion in annual sales and 20 million customers that can benefit from economies of scale, according to Mr. Rubin. Gilt targets more upscale, urban shoppers, while Rue La La has a wider, more mass appeal.
“People who say the flash sale model is dead don’t realize how much business is being transacted in this space by consumers—it’s tens of billions of dollars a year,” said Mr. Rubin, whose company also owns Fanatics Inc., an online seller of licensed sportswear, and who is a co-owner of the Philadelphia 76ers.
Industry executives said Gilt wasn’t a good fit with Saks, because the flash sale model is different from a traditional department store. Some of the luxury brands that sell to Saks balked at having their merchandise show up on Gilt, these people said.
“We are pleased to have found homes for the Gilt businesses,” a Hudson’s Bay spokeswoman said. The retailer is slated to report its latest quarterly results on Tuesday.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
Appeared in the June 5, 2018, print edition as ‘Saks Flash-Sale Site Is Sold to Rue La La.’This post was originally published here