By  on April 28, 2010

LAS VEGAS — Stephen I. Sadove, chairman and chief executive officer of Saks Inc., is cautioning against “overexuberance” as consumer demand and the economy appear to strengthen.

“Make sure you don’t forget the lessons of the recession and get into an overexuberance too quickly.…The single biggest determinant of the business is the stock market and how people feel about their net worth,” Sadove said during a panel discussion at American Express Publishing’s two-day Luxury Summit here. “If this Dow was to go back to 7,000, I think we’d have some real issues....Right now, I feel a sense of optimism…but it’s fragile.”

Sadove said he had no regrets about slashing Saks Fifth Avenue prices as much as 70 percent as the recession gained momentum during the 2008 holiday season.

“I would have done it again in a heartbeat,” he said during a discussion on luxury pricing that included Daniel Lalonde, president and ceo of Louis Vuitton North America. “It is a question of supply and demand. There was a huge excess of supply. Demand wasn’t there.”

Lalonde agreed with Sadove’s remarks about the retail environment, but differed with the Saks ceo on price cuts. He stressed that Louis Vuitton didn’t and doesn’t discount, adding that the brand performed well at Saks throughout the recession even though it was a full-priced island in a sea of sale items.

“We never go on sale,” Lalonde said. “That’s been wonderful, and I think its been one of the most important single factors of the success we have had in the last two years. We are over 150 years old, and our job is to make sure that we look at it 150 years ahead. We are stewards of the brand….These are just blips along the way. You have to really stick to what you’ve done successfully.”

Lalonde expressed concern that the recession-induced price changes caused consumers to be confused about products’ value. “There should be much more attention paid to try to full price all the time,” he said. “Price your product right. It would be a much better model, and I think it has to do with, eventually, leadership.”

Although Saks hasn’t repeated the price reductions of holiday 2008, the banner of steep discounting has been taken up by flash sales Web sites such as Gilt Groupe. But Sadove said their ability to accumulate merchandise that can be discounted 70 percent or more has been compromised by the economy’s upturn, and the sample sale sites become less alluring when their discounts get smaller.

“The number of people that want to buy excess product at 30 percent off is not that terrific,” he said. “The model can be viable…but the primary driver of 70 percent off is a very difficult one to do in the apparel space” because of tight inventories.

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