Discount fashion and merchandise retailer Gilt Groupe has sold itself in a fitting fashion: to Hudson Bay Co. for $250 million, a price tag that is a steep discount to the hefty billion-dollar valuation it once held.
Hudson Bay, the operator of department store brands such as Saks Fifth Avenue, is trying to build on its “off-price” business model by integrating Gilt with its Saks OFF 5th locations, which sells designer brands at a discount. Gilt’s online presence is giving Hudson Bay a boost to its mobile and digital businesses, the company said in a statement released Thursday, noting Gilt’s 9 million members who make 50 percent of their orders on mobile devices.
Gilt has raised more venture capital than the $250 million it sold for since its founding in 2007—some reports put the number as high as $280 million—with a $50 million round from General Atlantic coming less than a year ago. It raised $138 million in 2011 from high-profile investors such as SoftBank and Goldman Sachs, which valued the company at more than $1 billion, according to The Wall Street Journal.
Hudson Bay says it expects New York-based Gilt to contribute $500 million of sales in 2016.
Gilt has long been a darling of the investment and tech worlds, partly thanks to the view of its founders (pictured) as innovators in the flash-sale and daily-deal sectors. While the fallout from the acquisition in both arenas remains to be seen, rumors that the company may sell have been spread for about a month.
Gilt has long been rumored as an IPO candidate, but those hopes never came to fruition. It turned out to be a tough year for tech IPOs in 2015, even though the number of private companies valued at $1 billion has risen to 143, according to CB Insights. Only 48 companies went public in 2015, the lowest number since 2011, according to Bloomberg.
Daily-deal and flash-sale sites have also had their share of troubles. Pundits have been predicting the end of those markets for years, especially after companies like Facebook and Amazon have pulled out of them.
In the end, it appears as if Hudson Bay and General Atlantic will fare better than earlier Gilt investors. The Wall Street Journal reported in December that the funding from General Atlantic converted some earlier investors’ preferred-stock rights into common stock. The newspaper noted that while “General Atlantic would be able to recoup its investment, other investors will salvage some of their money and likely will nurse large losses.”
