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Prescription for Saks: Sadove Shifts Focus To the Core Customer

Saks Fifth Avenue will focus on older customers, adding more accessible luxury product and growing new private label lines.

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ATLANTA — Saks Fifth Avenue has a new blueprint, and chief executive officer Stephen Sadove is ready to build it.

Sadove, presiding over his first shareholders meeting since becoming Saks Inc. ceo in January, said here on Wednesday that the retailer will target a core customer who is 45 to 48 years old, seek to boost the performance of regional stores and renovate existing units, build relationships with key vendors and add new designers and more accessible luxury.

He reiterated plans to aggressively roll out private label after exiting the business a year ago.

And any doubt that Saks Inc. is Sadove’s company was erased when chairman R. Brad Martin took a lower profile than at previous shareholder gatherings, only introducing Sadove, who succeeded Martin as ceo after having served as vice chairman and chief operating officer.

In a postmortem on how the $2.7 billion SFA stumbled, Sadove said, “We focused too much on young, edgy customers, with too much marketing, too fast and too soon. We will keep attracting young customers, but not at the exclusion of our core base.”

Sadove told about 50 people during the hour-long session at The Ritz-Carlton in the Buckhead section here that new initiatives are helping the company get back on track.

Responding to pointed questions from shareholders about the time line for a turnaround, when they would see more return on investment and an improved stock price, Sadove said he was focused on improving sales performance and on bringing the current 2 percent operating margin to 8 percent in the next three to four years, and higher after that.

The presentation came as SFA revealed plans for its fall print advertising campaign and less than a week after the retailer said it would take a three-pronged approach to reinvigorate private label, introducing the Saks Fifth Avenue Signature collection in early August, the Saks Fifth Avenue Classic in November and, later, Saks Fifth Avenue Sport collection.

Sadove said Saks’ core customer base, with an average age of 48, and new customers, who average 44 years old, are the retailer’s primary target as it competes with Neiman Marcus as well as Nordstrom and Bloomingdale’s. Only 17 percent of new customers are 25 to 35. For that base, Saks will focus on important vendors, including Armani, Chanel and St. John, and showcase new designers.

This story first appeared in the June 8, 2006 issue of WWD.  Subscribe Today.

“With private label, you’ll see major changes this fall, and more in spring,” he said. “Private label was a $100 million business that we walked away from.”

Sadove also pointed to direct sales, which grew 40 percent last year; more brands on the Web site, and improved function. He said the direct business has the potential to grow to $100 million in sales this year.

The ceo said the new strategies soon should start to yield significant same-store sales improvement.

As for growth plans, Saks will open only a handful of new stores over the next few years, concentrating instead on a three-year plan to improve the performance of specific stores, especially those in regional and smaller markets, where some units can double volume, Sadove said.

“We’ve focused too much on the New York flagship,” which contributes about 20 percent of sales, Sadove said.

A major renovation of the Atlanta store completed last fall is a model for similar plans in Boston and Beverly Hills, he said. In addition, the New Orleans store, which was ravaged by Hurricane Katrina last year, is set to reopen on Nov. 17.

After the meeting, Sadove defined Saks’ new merchandising matrix, a nine-part grid that segments merchandise by price — “good, better, best” — and by “psychographics,” he said. “Park Avenue” is used to define its most conservative, classic mind-set; “Uptown” is a modern, updated classic, and “SoHo” is for its most contemporary product. The terms will be used to guide buyers.

Saks Inc. operates 54 Saks Fifth Avenue stores, 50 Saks Off 5th stores, saks.com, 38 Parisian units and 60 Club Libby Lu specialty stores. Parisian is for sale, with the goal of selling the Birmingham, Ala.-based chain by the end of the year.

Saks Inc’s first-quarter profits soared because of a onetime gain from the sale of the Northern Department Store Group, consisting mostly of the Carson Pirie Scott business. For the three months ended April 29, income was $81.5 million, or 60 cents a diluted share, compared with $16.2 million, or 11 cents, a year ago. The onetime boost from the Northern Department Store Group was 54 cents a share. Sales for the quarter, however, fell 32.9 percent to $1.04 billion from $1.55 billion, and total comps dropped 1.9 percent, reflecting the March sale of the Carson Pirie Scott operation to Bon-Ton Stores.

For its fall print campaign, Saks is featuring Honor Fraser — who left modeling seven years ago to get a degree in Chinese from the University of Southern California and start a career in the art world in Los Angeles — in four cinematic, black-and-white spreads. They were photographed by Anders Overgaard and show her at various points in a woman’s day.

In one image, Fraser is at work in a gallery wearing a Theory tuxedo and holding her son, Roscoe, on one hip while talking on a cell phone — the tag line is “Saks loves mixing business and pleasure.” Another shows her shopping at the Santa Monica, Calif., farmer’s market wearing Derek Lam and Marni, with the line, “Saks loves finding the perfect ingredient.” The two remaining ads were taken at the Chateau Marmont. One shows her reading “Lady Chatterley’s Lover” wearing Valentino: “Saks loves making your heart beat faster,” and the other pictures her getting a room-service delivery of Jimmy Choos in a Versace outfit with the message, “Saks loves special deliveries.”

Terron Schaefer, Saks senior vice president of marketing, said Fraser was chosen because “seven years ago, when she was the face of Givenchy, I thought she was incredibly beautiful, sophisticated and elegant.”

The print campaign continues in the vein of ads from the last three seasons.

“The campaign is about women who are confident, who are real and in control, not just lying, standing, staring vacantly back at the camera,” said Schaefer, who declined to disclose the ad budget. The ads will break in the August issue of Town & Country, followed by placements in September issues of W, Vogue, Harper’s Bazaar and Vanity Fair, among others.

With contributions from Marc Karimzadeh, New York, and Marcy Medina, Los Angeles

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