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Saks Fifth Avenue, which has been tiptoeing onto the international stage, took a big step Wednesday by opening its first store in Mexico.
The three-level, 150,000-square-foot unit in the upscale Santa Fe Shopping Center in Mexico City is a test to determine the potential for more stores in the country.
Saks described the unit as “congruent” with others in the luxury chain, in terms of product and service, and geared to cater to local tastes. Merchandise includes established and emerging designers and shop-in-shops for Salvatore Ferragamo, Kiehl’s, Hermès and Giorgio Armani. The store also has restaurants and the Fifth Avenue Club for personal service.
If the concept resonates with consumers, Saks and Grupo Sanborns, which is licensed to own and operate Saks Fifth Avenue stores in Mexico, will develop more stores.
In addition, Saks has been eyeing Japan, Qatar, Kuwait, Bahrain, Macau and India, among other locations. Saks is one of the few upscale department stores that is internationally recognized and transportable, largely because of its huge Fifth Avenue flagship in New York and key locations in portal cities such as Miami, San Francisco and Los Angeles that attract tourists, including those from Latin America.
Saks has two licensed stores in the Middle East, in Riyadh, Saudi Arabia, and Dubai. The company’s first licensed store in China is scheduled to open in 2009. In the U.S. there are 54 Saks Fifth Avenue stores and 49 Saks Off 5th stores, as well as saks.com and the Club Libby Lu specialty shops.
Stephen Sadove, chairman and chief executive officer of Saks Inc., said international expansion is not a core strategy, though it’s a good way to elevate the brand and broaden its reach, without taking too much risk.
“While our principal focus remains on improving the operations of our domestic stores, the opening of select international licensed locations can broaden the reach of our brand and produce a supplemental income stream for the company,” Sadove said in a statement.
With licensed sites, Saks receives an up-front fee plus an additional annual amount based on a percentage of sales, though there’s no equity involved and therefore less potential for the business to profit. Saks’ international team, headed by vice president David Pilnick, is involved in site selection, merchandising and store design, but does not build or operate the overseas units.
“We believe that we will fill a void that currently exists in the Mexican market by catering to a discerning luxury customer,” said Carlos Hajj, ceo of Grupo Sanborns.
Mexico-based Grupo Sanborns is a subsidiary of Grupo Carso, which controls and operates retail, industrial and consumer businesses. Within retailing, Grupo Carso operates Sanborns, Sanborns Café, Mixup music stores and Sears and Dorians department stores, as well as the Oakley, Mask, Pier 1, Sasch and Von Dutch specialty stores, among others. The company also owns and operates shopping centers in Mexico City.
Grupo Carso is controlled by Mexican billionaire Carlos Slim Helú, one of the wealthiest men in the world, and the largest individual shareholder of Saks. Helú and his family hold about 13.3 million Saks shares, or 8.7 percent of the total shares outstanding.