Dive Brief:

• Hudson's Bay owner HBC, which also owns American department store Saks Fifth Avenue, will spin off its off-price Saks Off 5th digital business into a standalone entity. 

• The partnership comes with $200 million from a group of investors led by private equity firm Insight Partners, according to a Monday press release. Rhône, also a private equity firm and an HBC investor since 2017, participated as well.

• Saks OFF 5TH's brick-and-mortar fleet, with 105 stores in the U.S. and Canada, will be known as "O5" and remain wholly owned by HBC, per the release. The two Saks Off 5th companies will be linked through a franchise-like relationship, the company said. 

Dive Insight:

With a lot of help from Insight Partners, HBC has been dicing its Saks operations into various business entities that come with both branding variations and overlaps.

In March the company split its full-line Saks Fifth Avenue digital and physical operations. There, the online business is also going alone, taking the name "Saks" and pocketing $500 million from the private equity firm. That brick-and-mortar business, now simply known as "SFA," remains with HBC.

The digital-physical divide is now mirrored on the off-price side. Paige Thomas, a Nordstrom Rack veteran who arrived last year to lead Saks Off 5th, will be president and CEO of the digital entity and serve on its board. Rob Brooks, previously chief customer officer at Saks Off 5TH, will be O5 president, reporting directly to HBC CEO Richard Baker, per the companies' release.

Thomas' experience at Rack could serve the new company well, considering that Rack is one of the few off-price retailers with robust e-commerce and offers an assortment similar to Saks Off 5th. The disconnected approach at Saks, however, is diametrically opposite to Nordstrom's recent plans to more fully integrate its online, offline, full-price and off-price operations.

Not surprising is that HBC is holding onto Saks' brick and mortar. Baker is a longtime real estate mogul who hails from a U.S. real estate dynasty. For years now, HBC has, as a result, often used a property value lens. "At HBC, we remain focused on identifying value within our assets and this transaction is a prime example of how we are successfully executing on this strategy," Baker said in a statement Monday.