Dive Brief:

• Private equity firm Sycamore Partners said Monday that it will acquire Charlotte, NC-based department store Belk for $3 billion. 

• The retailer’s headquarters will remain in Charlotte and its CEO, Tim Belk, will stay on. However, another Belk brother, Johnny Belk, said he’ll stay on as COO only through the end of January.

• Sycamore has a track record of investing in retail companies, though this is the firm’s first department store acquisition. 

Dive Insight:

It makes sense for a retail-focused firm like Sycamore Partners to take on a department store, but the timing seems a bit off, considering the challenges dominating that space. 

The company, through its CEO, who is a member of the family that controls some 70% of the stock and will remain, said that customers won’t see major changes to their beloved stores.

“The Belk that they love is not going to change,” Tim Belk told the Charlotte Observer. “We’re going to continue to build on the foundation we’ve put in place.”

But things likely will have to change. Department stores are facing something of an existential crisis. While they once thrived on customer service, upscale downtown locations, and varied merchandised offerings, they seem to have, in general, lost the ability to captivate shoppers.

“This is perfect timing for the Belk shareholders and terrible for the buyers,” Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates Inc., told the Observer. “The department store sector is terrible. I cannot explain why the buyers wanted it.”

Initiatives that better blend e-commerce and m-commerce with physical stores are crucial to the future of most department stores, and require nimble technologies that help with inventory and merchandising. Many companies, notably Nordstrom, have updated their staid, frozen-in-time in-store aesthetic by inviting in pop-ups and concessions that appeal to younger shoppers. And Nordstrom has been in the forefront of offering a discount alternative and e-commerce options.

So Belk has something of a blueprint for success. And it does enjoy great loyalty and a true Southern identity, which are among the most important if less tangible assets Sycamore is acquiring. At least for now.