One of the few remaining retailers in the private-label credit card business is paring down its portfolio but says it intends to remain in the business with an increased focus on its core brands.
Charming Shoppes Inc. said late Monday that, in conjunction with a deal to sell its "noncore" catalog retail operations, it would sell the card receivables for those units to Alliance Data Systems Corp. of Dallas for about $40 million in cash. Orchard Brands, a unit of the private-equity firm Golden Gate Capital Inc., has agreed to buy Charming Shoppes' Crosstown Traders catalog businesses for $35 million in cash.
Charming Shoppes currently has about $596 million of receivables. Gayle M. Coolick, a spokeswoman for the Bensalem, Pa., retailer of plus-size women's apparel, said it is selling the Crosstown Traders portfolio to Alliance Data "at par."
Dissident shareholders fought their way on to Charming Shoppes' board in May, and Dorrit J. Bern resigned as its chief executive last month. (Alan Rosskamm is currently the interim CEO.)
The dissident group had been pressing the retailer to focus on core assets and to consider selling the entire card portfolio. But on Tuesday, Charming Shoppes said it plans to retain the private-label portfolio for its three main brands: Lane Bryant, Fashion Bug, and Catherines.
"At this time we don't have any plan" to sell the rest of the card portfolio, Ms. Coolick said. "We do like controlling, operating, and aligning the way that we extend credit" to customers. "We very much like that strategy, and they're well profitable."
The receivables Alliance Data is buying "support a business that we will not be operating in the future," Ms. Coolick said. "We have really put our stake in re-engaging our business to focus on our core competencies," the three remaining brands.
Alliance Data managed the retailer's Lane Bryant portfolio until last year, when Charming Shoppes bought it for $230 million.
John Grund, a partner at First Annapolis Consulting Inc. who advises retailers on their private-label card portfolios, said that shared history could position Alliance Data to purchase the rest of the Charming Shoppes portfolio, if it becomes available. But he also said Charming Shoppes likely is not interested in unloading it.
"They've been very steadfast in their commitment to credit, particularly for their core businesses," he said. "All of their recent actions have been about repositioning their retail business. … They were shedding small businesses that they believe are noncore."
The receivables related to those noncore businesses fit well with Alliance Data, "because Alliance Data is a smaller player and caters to catalogs retailers and can absorb smaller portfolios efficiently," Mr. Grund said.
An Alliance Data spokeswoman declined to comment Tuesday.
Adil Moussa, an analyst at Aite Group LLC in Boston, said Charming Shoppes' deal was reminiscent of Target Corp.'s May sale of a 47% interest in its private-label portfolio to JPMorgan Chase & Co. for $3.6 billion.
Such arrangements can allow retailers to hold on to the portion of the portfolio that has "the least delinquencies and lowest potential to go delinquent, and the one that has the most profitability attached," Mr. Moussa said.
Maintaining a stake in a private-label portfolio "does allow for a lot of control," he said. "You do know what your cardholders are doing. You can target them. You can have access to a lot of information."
Cabela's Inc. and Nordstrom Inc. are two other major retailers that still own their own card portfolios.
The deal for Charming Shoppes' retail operations is expected to close by the end of September, and the deal for the related receivables is expected to close by the end of January.
