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Maximizing the Assets: Saks Flagship Charts Latest Set of Upgrades

It's not the grandiose master plan once envisioned, but the Saks Fifth Avenue flagship has a fresh round of renovations in store and a new manager to...

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It’s not the grandiose master plan once envisioned, but the Saks Fifth Avenue flagship has a fresh round of renovations in store and a new manager to orchestrate the changes.

The strategy, while cautious and proceeding piecemeal, includes a doubling in size and relocation of the shoe department, a new bridal salon and the remodeling of the third level that houses the evening and fur salons and the Fifth Avenue Club for personal shopping and designer collections such as Akris, Chado Ralph Rucci, Dolce & Gabbana, Giorgio Armani, Gucci, Marc Jacobs and Oscar de la Renta.

Also on the drawing boards: rebuilding the behind-the-scenes infrastructure, developing closer connections to customers through technology and a remodeling of the restaurant on floor eight with a “state-of-the art” kitchen that also caters Saks parties.

“We want to make sure our flagship represents Saks and our designers in the best way possible and that we’re doing that in the right time frame,” said Suzanne Johnson, who became group senior vice president and general manager of the Fifth Avenue flagship last month. “It’s probably not as fast as the original plan because of the sheer economics. It’s an old building. Whatever we do is very expensive.”

The 646,000-square-foot flagship, with roughly 340,000 square feet for selling, is Saks’ biggest asset. It’s critical for the chain’s revival, accounting for about 20 to 25 percent of sales, or roughly $650 million to $700 million of the chain’s total volume, which came to $2.94 billion last year. Between 12,000 and 15,000 people visit the store on a typical day, though the count can be as high as 20,000. Despite the wear and tear, it’s said to be in better shape than most other old buildings. Opened in 1924, the store was expanded into the Swiss Tower on Madison Avenue in 1989. Some major renovations have already occurred in the last few years, including building a perimeter of designer accessory shops, a larger fine jewelry department on the main floor and an updating of designer sportswear on two, with the addition of new shops for Ralph Lauren Black Label, Piazza Sempione, Armani Collezioni, Dusan and Loro Piana.

The plans for the flagship come amid reports that private equity firms and some retailers have been kicking the tires at Saks, which has been showing improved results lately. Anyone considering buying the business would first focus on the flagship, which is owned by Saks and is estimated by real estate sources to be worth over $1 billion.

Considering it has landmark status, is opposite Rockefeller Center and across the street from St. Patrick’s Cathedral, there’s no opportunity to add higher floors, so it’s a question of maximizing the existing space, which poses enormous logistical and service challenges.

In addition to the third floor and shoe renovations, Johnson outlined significant changes, including:

-A new bridal salon on five due in June.

-The installation of a Web-based clienteling system to increase communications with the public and generate increased transactions. The system just went live.

-Possibly rebuilding infrastructure for processing deliveries and getting goods on the floor faster and more efficiently.

According to Johnson, the new shoe floor will have an express elevator to eight, to where shoes will be relocated from their current space on the fifth floor. There will also be a shoe repair service and quicker access to storage and retrieving the shoes for the selling associates. “This is where the back of the house has to be perfect,” Johnson said. “You have to be able to put the shoes back quickly. We’ve got to really be running that shoe inventory and there has to be lots of seating.” The restaurant will remain on eight.

The third floor will see improved adjacencies and key vendors will be given more space, Johnson said. And commenting on the upgraded bridal salon, she said, “It will be comfortable enough to support the bride and her entourage.”

The flagship’s 1,500 selling associates have been trained on a Web-based clienteling system that connects to Federal Express so deliveries can be tracked and customers can know when to expect their purchases.

Meanwhile, there’s an intensified calendar of designer personal appearances ahead. The Rachel Roy collection was introduced at Saks last week with a party for the designer; Donatella Versace and Alber Elbaz will appear for their fragrances next month, and Graeme Black for his collection also next month.

Aside from all the front and center partying, Johnson is making infrastructure a priority and has an anecdote to illustrate the point. “On my first day, I was here very early. I walked around the whole block at 6:45 a.m. I started my rounds in the basement and worked my way up and learned that the freight elevator was broken. It had been broken for 30 days. It was just old,” Johnson said. “Night crews were loading and unloading trucks on the street,” including merchandise destined for the Off 5th outlet division. “Merchants wanted to know where their merchandise was,” and some of it was languishing on the 49th Street side of the store.

“One of the biggest challenges I have is to assess the whole support infrastructure for processing merchandise ­— the back of the house,” Johnson said. “We don’t have enough space to process the quantity of inventory that is coming into this building. There is not enough back space to process it efficiently.”

Arriving merchandise must be unpacked, accounted for and hanged. “The whole reengineering of that is not the most glamorous thing, but it is most important if we want to bring the flagship to a new level,” Johnson said. She added that the company is considering processing merchandise to get it floor-ready at a different location, possibly in the city, or in Aberdeen, Md., at the Saks distribution center.

Her last Saks job had its less glamorous side, too. Since 2002, she ran Off 5th, based on 31st Street and Ninth Avenue, a remote location compared with midtown Fifth Avenue. “When you boil it right down, I sold the markdowns. That was my job,” Johnson said.

Discussing her promotion to the flagship, she gets animated. She’s responsible for getting a strategy in place to grow the flagship business, executing the sales plans, and said she spends 80 percent of her time on the selling floor or in stock areas. When she’s back at her office, Johnson is checking the hourly flash, and that often drives her back on the selling floor, particularly if the store is falling short of plan, to encourage managers to get the business in gear.

She’s also sentimental about the flagship because her father, a former psychiatrist, bought his army uniform at Saks for World War II. Her mother was a jazz singer.

Johnson, 51, has been with Saks for a total of 21 years. She joined the company in 1983 as assistant general manager in Cincinnati, ran branch stores in different parts of the country and rose to a senior vice president and regional director of stores, at times in different regions. She’s from Whitefish Bay, Wisc., and currently lives in Westport, Conn. She was director of stores for J. Crew from 1992 to 1996, before returning to Saks.

“I always wanted this job. It’s a dream job. Steve knew I wanted to run this store,” she said, referring to Steve Sadove, the chairman and chief executive of Saks Inc. Next to Sadove and Ron Frasch, president and chief merchant, Johnson as the flagship representative would be among the more visible executives at the company.

“I didn’t push that hard, but I really wanted this job for 10 years,” Johnson said. “It’s the greatest store in the world.”

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