Saks Inc. is closing its regular and men’s stores in Portland, Ore., and chairman and chief executive officer Stephen I. Sadove left the door open for additional closures in comments to an investment conference Tuesday.
Saks expects to shut the 23,000-square-foot men’s store in the Pioneer Place Mall on April 25 and the 60,000-square-foot main store in the center by July 31. About 100 employees will be affected, and Saks said they would be offered transfer opportunities or receive appropriate severance packages.
A spokesman for Saks told WWD, “The store did not meet our profitability standards and the lease is expiring, so it makes sense to close the store.”
Announcement of the closings, which will reduce the number of Saks Fifth Avenue stores to 52, came just hours after Sadove told attendees at Citi’s 2010 Retail Conference that the firm would consider closing units when profitability standards aren’t met.
“There is an opportunity to close a number of stores,” he said. “We’re not talking about a huge number of stores. If you have an unproductive store that’s cash flow negative…and you have a lease that’s coming due and you don’t see an opportunity for that store, then you’ll close it. And you’re going to see a bit of that.”
Later, he told WWD that a “handful” of stores could shut over the next couple of years but that the number wouldn’t be “huge.”
He added, “We’re not going to be hesitant to evaluate stores.”
Saks will on occasion let leases expire, or speak with landlords to see if there’s a possibility of negotiation for different terms, he said. Although lease modifications can be an expensive proposition, many shopping center operators have been more open to them as they’ve faced a wave of bankruptcies, store closings and lease expirations without renewals since the onset of the recession.
Discussing the issue further at the Citi conference, Sadove noted that “one of the misconceptions people have is that big stores do well and small stores do badly….There could be a big store that’s productive but that’s been saddled with a real estate deal made 20 years ago that’s not attractive.”
Sadove said Saks wasn’t adverse to opening stores, and could take advantage of opportunities for the Off 5th concept, but noted, “I doubt that you’re going to see a lot of new stores opening on the full-line side — maybe one or two over time, but that’s not where the growth is going to be. It’s going to be in making the current stores more productive.”
Saks’ capital expenditures, $59 million last year, will be trimmed to about $55 million in 2010, down from the range of $125 million to $150 million a year spent prior to the recession, Sadove said.
Word of the Portland closings followed not only Sadove’s remarks but also an upgrade, to “overweight” from “neutral,” from J.P. Morgan equity analyst Charles Grom and the establishment of a new 52-week high for Saks shares. Peaking at $9.57, they ended the day at $8.96, up 20 cents or 2.3 percent, as the S&P Retail Index pulled out a late gain, advancing 0.38 points, or 0.1 percent, to 451.37.
Earlier this month, Diego Della Valle, ceo of Tod’s SpA, spent $52.5 million to acquire an additional 5.62 million shares of Saks stock and boost his holdings to 9.4 percent of the shares outstanding. That stake is now worth $134.4 million, nearly $7.1 million more than it was one week ago. (For more on stocks, see page 14.)
Grom lifted his target price for Saks to $11 from $7. Pointing out Saks was “the least-loved name in our coverage group,” with the highest short ratio of any firm on its radar — 37.4 percent of the shares floated. He noted the stores had enjoyed three consecutive months of positive same-store sales and has easy sales comparisons going forward, opportunities to reach a new high in gross margin, a “solid” free cash flow profile and a disciplined approach to expenses, inventories and capital.
Also on Tuesday, Standard & Poor’s Ratings Services downgraded its corporate credit rating for Liz Claiborne Inc. one notch to “B-minus” from “B,” putting it at the low end of the speculative group for which business conditions “will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.”
Linda Phelps, credit analyst for S&P, said the downgrade “reflects the continued deterioration in the company’s credit metrics and our expectations that they could remain weak in the near term. In addition, underlying economic conditions and consumer spending remain weak.”
Alberta Ferretti's "Rainbow Week" sweaters are back. The designer closed her #MFW show with a few day-of-the-week sweaters, which first debuted on the catwalk last January as part of the pre-fall 2017 collection. #wwdfashion (📷: @delphineachard)