By  on December 20, 1994

NEW YORK -- Saks Fifth Avenue fired a shot across the bow of the West Coast retail landscape Monday, when it announced it had acquired four former I. Magnin units.

The stores are in Beverly Hills, Carmel and San Diego, Calif., and Phoenix. I. Magnin is in the process of being shut down by its parent, Federated Department Stores, as a result of Federated's merger with R.H. Macy & Co., as reported.

As part of a move to increase its profile in California and Phoenix, Saks said it will also renovate and expand its existing San Francisco store.

The moves will increase Saks' presence in the West Coast to 765,000 square feet, a 20 percent gain.

Ironically, some retail experts have been anticipating a downsizing by Saks, which, they say, has been under pressure to improve its bottom line. Monday's announcement is a sign of Saks's confidence in its ability to strengthen its Southwest and West Coast franchise and a show of support from its parent Investcorp.

According to Philip Miller, chairman and chief executive officer of Saks Fifth Avenue, the additional space should add $100 million to the chain's volume.

While Miller declined to say how much Saks paid for the Magnin's units, he said the company will invest $60 million to $70 million on renovations and expansions.

The 100,000-square-foot former I. Magnin unit in Beverly Hills is across the street from a 160,000-square-foot Saks store. The company said it will use the I. Magnin location to create a Men's Store that will also house selected women's apparel, children's wear, bridal salon, gifts, a restaurant and beauty salon.

With a 125,000-square-foot Barneys New York on Wilshire Boulevard and a 240,000-square-foot Bloomingdale's scheduled to arrive in 1997, Saks' Beverly Hills expansion should touch off a heated upscale retail battle.

"Saks is saying, 'We're facing new competition from Barneys and Bloomingdale's. We've been there for a long time and we're not going to allow ourselves to take a second position to those stores,"' said Arnold Aronson, a partner in Levy Kerson Aronson & Assoc., retail management and executive search consultants, and a former ceo of Saks Fifth Avenue."If there's going to be a battle for the business, they at least want to be on a level playing field for it," Aronson said, noting that zoning restrictions in Saks' current Beverly Hills location prohibit it from expanding. "They are going to have some parity in square footage."

Saks Fifth Avenue recently closed some underperforming stores on the West Coast, including Woodland Hills in Los Angeles, and La Jolla and Mission Valley, both near San Diego. A unit in Palo Alto was converted to a clearance center, which will close on Jan. 14.

In San Diego, the 80,000-square-foot former Magnin store at Fashion Valley will replace the La Jolla and Mission Valley stores. In Phoenix, the 90,000-square-foot former Magnin in Biltmore Fashion Park unit will replace Saks' existing store in Fashion Park. An existing 24,000-square-foot Saks unit in Carmel will gain an additional 20,000 square feet by expanding into the adjacent former I. Magnin unit.

Miller said the Beverly Hills units will become the equivalent of a West Coast flagship for the chain.

"The two stores combined will have 260,000 square feet of selling space," Miller said. "It will be the biggest specialty store presence in the country other than the New York Fifth Avenue flagship. It will give us the ability to almost have a mirror image of our Fifth Avenue flagship on Wilshire Boulevard."

According to industry sources, the Saks units in Beverly Hills are among the chain's top five units. The Beverly Hills store reportedly does about $50 million currently, while the Union Square store does $50 million to $60 million.

Neiman Marcus and May Co. were also reportedly interested in the Magnin units. However, the synergy between the Saks and I. Magnin customer seems made to order for Saks.

"This is an excellent move for Saks and therefore for the I. Magnin customer," said R. Fulton Macdonald, president of International Business Development. "It will send the signal to the I. Magnin customer that Saks is picking up the mantel. You won't have the I. Magnin customers disappear."

"Our customer bases are very congruent," Miller said. "We have the additional benefit of having Rose Marie Bravo as our president, who understands that customer exceedingly well and knows many of the best customers on a first name basis."Bravo was chairman and ceo of Magnin's.

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