By  on May 19, 2009

Saks Fifth Avenue is in the throes of more strategic shifts, involving price and product changes and expense slashing.


In the works are merchandising initiatives on the local store level, exclusive lines in collaboration with brands and rejiggering the company’s “good, better and best” brand platform.

“Clearly, there is a cultural change going on, focusing on adapting to this new environment,” Stephen I. Sadove, chairman and chief executive officer of Saks Inc., told WWD. “It involves cost management, controlling inventories and ensuring that strategies are sound for the short term as well as long term. Business is terrible. It’s a tough environment. We feel the team has responded remarkably well.”

For the $3 billion Saks, there’s been no letup in the pressure, as the company on Tuesday reported a $5.1 million loss and a 26.9 percent sales decline, to $621.3 million from $850 million, in the first quarter ended May 2.

Shareholder pressure could increase, too, as Diego Della Valle, chairman and ceo of Tod’s, reportedly intends to boost the stake in Saks held by his firm Diego Della Valle & C. S.A.P.A. from 5.9 to 10 percent and might seek to present a turnaround plan to Saks’ management. According to a report in the Italian newspaper Il Sole 24, Della Valle also wants to meet with Carlos Slim Helú, the Mexican billionaire who owns 18.6 percent of Saks. The company is not officially on the market but could be a good investment, considering its low but rising stock price, closing at $4.81, up 73 cents, or 17.9 percent, on Tuesday on the New York Stock Exchange.

Asked if he would entertain a visit from Della Valle, Sadove replied: “Of course. I entertain visits with shareholders all the time. Diego has been a great vendor for Saks and knows the business. I am happy he is an investor in the company.”

Sadove said he didn’t know if Della Valle was definitely planning to visit Saks or up his stake. Della Valle couldn’t be reached for comment Tuesday.

Meanwhile, Saks’ management remains more focused on fixing the mix. The luxury chain is striving for its “best” brands, the top tier, including Chanel, Jil Sander and Oscar de la Renta, to comprise roughly 25 percent of the mix, down from about a third.

About 75 percent will be equally divided, more or less, by “better” labels (such as Max Mara and Burberry) and “good” lines (such as Tory Burch and Lafayette 148). These two tiers each represent about one-third of the assortment.

Prices could be down roughly 10 percent for fall and next spring as the chain changes its mix and encourages vendors to implement fabric and style adjustments. Sadove cautioned not to assume price cuts will be on existing items from vendors. “We don’t control their pricing. It’s more about changing the mix of product,” he told WWD. “We may be buying a shoe with different fabric or embellishment [and], in some cases, trying to get vendors to offer better price points within the assortment and have more of a range.”

Among shoppers, “We are seeing a trading down in price point, but our customer does not want to trade down brands. They love the brands,” Sadove said during a conference call with Wall Street analysts. “They are valuing brands as much or more than before, but they like the idea of getting lower price points in terms of the brands they like.”

“There are a number of brands developing exclusive private collections for us,” added Ron Frasch, president and chief merchandising officer. “Branded private label is the best way to put it, involving a series of initiatives from ready-to-wear to accessories to men’s wear, which we will announce through the end of the year.”

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