When Belk announced its impending bankruptcy filing last Tuesday, the retailer assured customers, employees, and suppliers that it would continue with “normal operations.” However, Belk is far from a “normal” department store. It operates a wide variety of locations but lacks a cohesive image. Belk needs a collective plan.
In 2015, the Belk family sold the business to Sycamore Partners, a private equity firm. Sycamore specializes in making the most out of distressed retailers. However, the combination of increased retail competition, a subpar e-commerce site, and Covid-19 pushed Belk to the brink of failure in 2020.
On Jan. 26, Belk announced its intention to file for Chapter 11 bankruptcy in late February. The retailer stated it will be a pre-packed expedited filing. Sources familiar with the situation report that Belk intends to file and complete its bankruptcy reorganization in just one day.
The reorganization will reduce Belk’s debt by $450 million, infuse the retailer with much-needed cash, allow Sycamore to maintain a slight majority control, and give first lien term lenders a minority stake in the department store. The bankruptcy filing seems to address Belk’s immediate woes, not necessarily provide the retailer with a long-range plan for the future.
Sycamore originally wanted to take Belk beyond its Southern roots. It hoped to make Belk more fashion-oriented and give it a nationwide presence. However, that decision only confused and alienated loyal customers.
Belk was never structured to be a “normal” department store. Founded in 1888 and based out of Charlotte, North Carolina, Belk’s stores were run by “partners,” local businessmen who were trained by the firm, managed their own stores, and owned shares in the parent firm.
In 1997, Belk decided to create one unified department store company and bought out its partners’ stock. It resulted in a jumbled collection of stores of various types. A look at four of the retailer’s current roster of approximately 300 stores shows a fractured firm in need of a collective strategy.
Charlotte is not just the retailer’s hometown; it is also the second largest financial and banking market in the United States. Belk’s SouthPark store, located six miles south of the center of Charlotte, is a top performer and is considered one of the company’s crown jewels.
Belk joins anchors Neiman Marcus, Dillard’s, Macy’s
The SouthPark Belk has come a long way from its earlier days. Today, it carries merchandise by Prada, Burberry, Versace, alongside more traditional assortments. Its budget department was eliminated over three decades ago.
The store contains over 333,000 square-feet of space, spread over four floors. It’s been continually renovated and updated and has competed handily with the mall’s upscale tenant mix.
The size and image of Belk’s SouthPark store is in sharp contrast to its Stuttgart, Arkansas location. The small community, located 60 miles east of Little Rock, has a population of only 9000. SouthPark’s trade area is over 1.6 million residents.
The Stuttgart store relocated from Main Street to a modest shopping center back in 1966. Even though it expanded into a second neighboring building several years ago it is only one-tenth the size of its Southpark counterpart.
Stuttgart doesn’t carry the high-fashion brands sold at the SouthPark Belk. It doesn’t need to. Stuttgart is not a high-fashion town. The two stores couldn’t be more different, yet both locations sport the same Belk nameplate on their exteriors.
The Mall at Waycross, located in southeast Georgia, opened in 1974 as the Hatcher Point Mall. It’s similar to almost every other mall throughout the Southeast and has been anchored by Belk since the mall’s opening day.
The mall was built at a time when enclosed malls were all the rage. Every large and mid-size city wanted and needed an indoor mall. Malls provided clout for communities in search of a higher profile.
However, shopping malls no longer generate the excitement that they once did. The Waycross Belk currently anchors a mall with just a 50% vacancy rate. JCPenney
Belk anchors many small, distressed Southern malls such as Waycross. These smaller malls are home to little more than the typical collection of Bath & Body Works, GNC, Foot Locker
JCPenney typically co-anchored these smaller malls. However, in recent years it has retrenched and abandoned these distressed properties.
JCPenney had its own experience in bankruptcy court just a few months ago. Like Belk, JCPenney has seemingly survived the short- term but also needs a strategic plan for the future. JCPenney also operates stores of all shapes and sizes.
The Belk in California, Maryland, located 70 miles east of Washington, DC, is unlike the Charlotte, Stuttgart, and Waycross locations. Built in 1989, the California Belk is located in a traditional shopping center, not a major enclosed mall.
The California Belk is the main anchor for the Wildewood Shopping Center. Though it is a clean, well-stocked, and well-maintained store, it’s relatively small. It is not a destination store and caters primarily to the local community.
The far-flung California location is one of only three Belk stores in Maryland. The nearest Maryland Belk, located in Westminister, is over 110 miles away. The California store is not afforded a large-scale regional advertising budget and its success is dependent on its local reputation.
These four stores are just four pieces of a larger puzzle the retailer needs to solve. Can Belk’s future be successfully placed in a private equity firm’s hands? Does Sycamore and other private shareholders have the ability or patience to save Belk? Is the retailer’s bankruptcy filing any part of a long-term strategy or it is just a stop-gap method that keeps the firm going for a few more years?
Belk is a store with strong Southern roots and its owners must embrace those roots. There will likely be some downsizing in its future. But in order for Belk to have a future, it needs owners and leaders who understand the Belk brand and structure and are committed to a department store company that doesn’t quite fit the norm.
