NEW YORK — Between cutbacks and closings, Saks Fifth Avenue took its lumps in 1993. But according to chairman and chief executive officer Philip Miller, the chain has gotten off to “a very good start” this year.
Riding improvements in ready-to-wear sales, Saks will post comparable-store gains in the high single digits or better this quarter, Miller said Wednesday at the Fifth Annual Herbert Blueweiss Key Issues Seminar at FIT.
The four-hour seminar was peppered with news, much of it related to TV home shopping. Among the choicer items:
Levi Strauss will sell its Brittania, Levi’s and Dockers brands on two TV home shopping channels, Catalog 1 and TV Macy’s, beginning in late fall. No format has yet been set.
Catalog 1, the Spiegel-Time Warner venture that already offers products from Neiman Marcus, Crate & Barrel, Williams Sonoma, The Sharper Image, The Nature Co., The Bombay Co. and Eddie Bauer, will be online in suburban Milwaukee in a couple of weeks. The channel was launched last week in Nashua, N.H., Rochester, N.Y., and Columbus, Ohio.
Saks will make its fifth appearance on QVC in May. After that, it’s up in the air. Talks regarding future shows are in progress. Profits are the issue.
Miller said that Saks, which had good sales but limited profits when it appeared on QVC, is still interested in exploring TV home shopping, whether interactive or not.
High return rates have limited Saks’ profits on QVC, although Miller told the crowd that sales on QVC have been good — $400,000 to $600,000 per show. He said return rates are “a little north of 30 percent, not dramatically different” from those of Folio, Saks’ catalog operation. Folio has a 22 to 25 percent return rate.
Saks had four shows on QVC, three featuring private label goods. A Christmas show focused on gifts and accessories.
John Shea, president and ceo of Spiegel’s, said TV home shopping programs can initially cut into catalog sales by 15 percent, but within 18 months, the catalog business bounces back.
“We don’t see it as a threat,” Shea said. Speakers also disclosed plans in the world of conventional retailing:
Eddie Bauer, the $1 billion retail and catalog division of Spiegel, will open 60 to 70 stores this year and again in 1995, according to Shea. Last year, 23 units opened.
In a joint venture with Otto-Sumisho Inc., Bauer will open three stores in Japan this fall. Spiegel research shows the potential for 75 to 100 stores in Japan, Shea said.
Another featured speaker, Robert Rockey, president of Levi Strauss NA, reiterated the company’s plans to spend $400 million on improving customer service to retail clients. It’s currently the firm’s “Achilles heel,” said Rockey. Speeding deliveries and simplifying ordering are priorities, he said.
Other speakers on the panel were Walter Elisha, chairman and ceo of Springs Industries, and retail consultant Emanuel Weintraub.
In an interview after the seminar, Miller reviewed his chain’s first-quarter performance, saying, “The plan is mid-single digits, and we are beating it.”
Regarding EBITDA, he said, “It’s too early to tell, but there may be an opportunity to be above plan here, too. It won’t be below. I think the momentum is building.” The best-selling categories at Saks have been bridge sportswear, dresses, special sizes, coats, designer rtw and designer sportswear, he said.
“The whole tone of ready-to-wear is significantly improved. The clothes are better,” Miller observed.
In 1993, the chain posted “a good sales increase, a strong fourth quarter and a respectable EBITDA increase,” he said, but EBITDA fell below plan.
During the seminar, Miller said Saks expects increased EBITDA, and possibly a double-digit sales gain for the quarter, which concludes at the end of April.
He also said the chain could grow from last year’s $1.3 billion volume to $2 billion in three to four years.
Since embarking on a cost reduction drive in 1989, the chain has reduced annual expenses by $100 million. It meant letting go 1,810 employees, or 14 percent of the total work force, in 1989. The company has been reviewing stores and so far this year announced four closings, all in California.
There could be more closings, but Saks is not abandoning recession-wracked California, where five Saks units remain. Miller said the company is spending $25 million to build a new men’s wear extension in the Beverly Hills store on Wilshire Boulevard. The other units are in Carmel, Costa Mesa, San Francisco and Palm Springs.
Miller also said alternative sites for the Houston and White Plains, N.Y., stores are being considered “to trade up to better locations.”
These efforts are expected to strengthen the company’s balance sheet and allow the chain to be taken public in three to five years.
Miller said key growth areas at Saks include the Fifth Avenue Club personal shopping service, private label, clearance stores and large sizes.
Saks will open four to six more clearance centers this year, and it could grow to a $100 million operation in five years. Each unit does about $10 million in sales annually.
Within five years, the chain plans to double its direct response sales, now at $65 million.
Saks First, a program launched in 1992 for preferred customers offering incentives, free gift wrapping, a fashion newsletter and other services, brought in $56 million in incremental sales over the 1992-1993 period.
The Fifth Avenue Club posted $70 million in sales last year and is growing at an annual rate of 15 percent.
Although Saks says it is seeing a pickup in business, there was a word of concern from Levi’s Rockey: “Even though there are signs of a strengthening economy. Consumers continue to buy cautiously. They’re price-conscious and value-conscious.”