Fumbi Chima is Burberry’s newest chief information officer and will report to chief operating officer John Smith.
With its $350 million acquisition today of Retail Convergence Inc., operator of SmartBargains.com and RueLaLa.com, GSI is moving directly into the online retailing business.
In recent years GSI Commerce Inc. has made acquisitions to bolster its base as an e-commerce services provider. But with its $350 million acquisition today of Retail Convergence Inc., which operates SmartBargains.com and RueLaLa.com, GSI is moving directly into the online retailing business.
GSI will purchase Retail Convergence for $180 million at the closing of the deal, including $90 million in cash and the balance in shares of GSI stock. The deal is expected to close in about 30 days. To earn the remaining $170 million in what GSI calls earn-out provisions, Retail Convergence must achieve non-GAAP income from operations of $51.9 million in fiscal 2012. As of Sept. 30, Retail Convergence, which operates SmartBargains.com, No. 101 in the Internet Retailer Top 500 Guide, had cash of $7.5 million and no debt, says GSI. In fiscal 2010, Retail Convergence is expected to generate revenue of at least $230 million, $7 million in income from operations and $15 million of non-GAAP income from operations, says GSI. GAAP stands for Generally Accepted Accounting Principles.
GSI, which in September acquired Pepperjam, an online marketing agency and affiliate network, for an undisclosed price, is purchasing Retail Convergence because of the unique e-commerce model offered by RueLaLa.com, a members-only web retailing site that sells jewelry and other luxury goods through limited-time sales. Since launching RueLaLa.com in April 2008, the site has attracted more than 1.2 million members.
"We are excited to enter the private sale market with industry-leader Rue La La and we believe this new way of shopping will continue its remarkable growth trajectory, based on its benefits to brands, retailers and consumers,” says GSI CEO Michael G. Rubin. “Rue La La’s short, intense events are entertaining and engaging. They have proven to be an effective solution for brands and retailers to sell significant opportunistic merchandise in a compressed time period.”
In the third quarter of 2009, RueLaLa.com posted sales of $28 million, compared with $5.8 million in the third quarter of 2008, an increase of 383%. “The private sale sector is changing e-commerce through exceptional levels of virality, dynamic customer experience and highly engaged members,” says Retail Convergence CEO Ben Fischman. “Since launching in April 2008, Rue La La has experienced tremendous growth and we are excited to further our momentum by becoming part of the GSI family. GSI’s extensive infrastructure, marketing services expertise and relationships with retailers and brands will provide brands and members with an even more robust experience, accelerating Rue La La’s global potential and positioning us for leadership in this exciting e-commerce segment.”
Fischman will continue to lead Rue La La and SmartBargains.com, reporting to Rubin, GSI says. GSI was advised on the transaction by Bank of America Merrill Lynch and Blank Rome LLP served as legal advisor. Retail Convergence was advised by Cowen & Co. LLC. Goulston & Storrs served as legal advisor.
GSI also broke out its third quarter financials.
- For the quarter ended Oct.3 sales increased 1.9% to $190.3 million from $186.8 million.
- Net loss was $9.4 million compared to a net loss $14.2 million in the prior year.