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Saks Fifth Avenue’s CEO Talks Better Productivity

Stephen Sadove told WWD that the department store is gaining market share.

Stephen I. Sadove

NEW YORK — Saks Fifth Avenue’s performance is improving yet there’s “a long way to go” before its profitability stacks up to the competition, Saks Inc. chairman and chief executive officer Stephen I. Sadove acknowledged Wednesday.

“We have an objective over the next several years to get ourselves to an 8 percent operating margin. The fundamental thing we need to do is to improve our store productivity. If we can get our store productivity up to a more competitive level, especially with some out-of-town stores, I believe a much higher operating margin is achievable,” Sadove said in response to a shareholder question at the firm’s annual meeting here. Executives declined to disclose sales per square foot, but they are believed to be well under the industry-leading $500-plus achieved by Neiman Marcus in good times.

With a total of about 50 shareholders and management executives on hand, the annual meeting went smoothly even with corporate gadfly and shareholder Evelyn Y. Davis dominating the Q&A while being complimentary to the ceo.

Last quarter, Saks’ profit margin was 4 percent, marking a return to its prerecession rate. Comp-store sales were ahead 10 percent and beat much of the competition. Sadove told WWD that was a sign of Saks gaining market share. “We made progress in the first quarter. We believe we are still making progress,” he said.

Sadove elaborated on how Saks could elevate productivity, first telling shareholders that there is “still a little bit of opportunity” to close a few more unproductive stores, “not a large number,” after shutting seven last year. He then cited targeted investments in a number of key, strong-performing categories and channels that Saks is eager to pump up: the Internet, Off 5th outlets, shoes and handbags. Later, he added jewelry; men’s wear, particularly tailored clothing, and the Wear bridge department to the areas where Saks can further capitalize.

The luxury market is growing, Sadove said, partly because it took a big hit during the recession, creating some pent up demand currently and partly because the stock market is strong. “We’ve gotten off to a very good start” in 2011. “There’s an improved environment in luxury.” And he believes the luxury market could get bigger than it was prerecession because of “cultural dynamics” such as celebrities, red carpets and movies fueling interest in fashion.

Davis did ask Sadove if the BlackRock fund, which has over 8 percent of Saks shares, down from over 12 percent a year ago, was seeking a seat on the board. Sadove said it hasn’t asked for representation.

She also asked if Saks would take itself private and said she wanted Saks to remain public. “We never comment on any merger or acquisition questions,” Sadove replied. “We feel very comfortable with how we manage the company and very comfortable with the ownership structure.” Whether the company was private or public, “We wouldn’t run it any differently.”