NEW YORK — The management intrigue continued Wednesday at Saks Inc., with the news that Steve Sadove, vice chairman, has been given the additional role of chief operating officer and overall responsibility for all the company’s retail...
NEW YORK — The management intrigue continued Wednesday at Saks Inc., with the news that Steve Sadove, vice chairman, has been given the additional role of chief operating officer and overall responsibility for all the company’s retail operations.
Saks Inc. also on Wednesday reported strong sales and profits for the fourth quarter, and strong sales in February.
Since November, there has been a flurry of executive comings and goings at Saks, remaking the top ranks. R. Brad Martin, chairman and chief executive, has been pumping up the organization with the aim of making Saks Fifth Avenue and the Saks department store group more competitive with new strategies and clearer directions. The position of chief operating officer is a new one, and Sadove continues to report to Martin.
While some view the organization as becoming top-heavy, others point out that competitors such as May Department Stores and Federated Department Stores also have central offices stacked with vice chairmen, though those retailers are about two-and-a-half times the size of Saks Inc. and operate more divisions.
In an interview, Martin beat down speculation that Sadove’s appointment was part of a developing succession strategy. Instead, he stated: “It’s truly a formulization of the way we have already been operating.” Martin got married last October, has two children from a previous marriage, and has a private family business based in Memphis, called RBM Ventures, which has a range of investments. But when asked if he was at all pulling back from his active role, he responded: “No. Actually, this [Sadove’s appointment] lets me focus even more on a variety of things, such as real estate and capital allocations.”
“Brad considers himself an entrepreneur,” said one source. With his activities extending outside the retail arena, “Brad has clearly handed over the day-to-day operations [of Saks Inc.] to Steve.”
The company’s 18-member senior executive committee will be chaired by Sadove, who now has George Jones, president and ceo of the Saks Department Store Group; Fred Wilson, chairman and ceo of Saks Fifth Avenue Enterprises, and Jim Coggin, chief administrative officer, reporting to him. The committee includes Jones; Wilson; the presidents of Proffitt’s/McRae’s, Carson Pirie Scott & Co. and Saks Fifth Avenue, and senior corporate staff and sales support executives.In addition to Sadove, others continuing to report to Martin are Doug Coltharp, chief financial officer; Charles Hansen, general counsel, and the corporate real estate functions.
Martin said that with Sadove’s advancement, the top tier is set and that no additional appointments are contemplated. “This is the team — the leadership team,” he said.
There could, however, be some changes at lower or middle-management levels, such as with merchants. “That would be the normal course of business” changes, Martin said.
While his promotion affirms his status as the second in command, Sadove said his appointment is “absolutely not” a reflection of a succession plan. “Brad is fully engaged,” Sadove said. “This clarifies for everyone what my role is and what his role is. The structure works quite nicely, with Fred getting the operating room to be ceo of Saks Fifth Avenue Enterprises and having appropriate linkages into the center,” meaning the corporate office.
What remains unclear is what Ron Frasch will be doing. Officially, the former chairman and ceo of Bergdorf Goodman joined Saks Inc. last month to develop international opportunities and private brands. Considering Frasch’s background at Bergdorf’s, as well his earlier executive jobs at GFT, Escada and Neiman Marcus, it’s a peculiar hybrid assignment. Yet according to Martin, it’s only temporary for Frasch. “Ron will play a big role, long-term, in the company,” Martin said. “That’s all I am going to say.”
Frasch came to Saks Inc. bound by a noncompete agreement with the Neiman Marcus Group, parent of Bergdorf’s. He signed the agreement in November 2002, which restricts his activities at Saks, at least for the time being, including possibly visits to vendors and recruiting. Frasch still hasn’t been given a title, further mystifying his role.
In addition to Frasch and Wilson, the former ceo of Donna Karan, last month Andrew Jennings and Terron Schaefer joined the team. Jennings, who ran Holt Renfrew in Canada, became president and chief merchandising officer of Saks Fifth Avenue, and Schaefer, formerly worldwide creative director at the Simon Property Group, became senior vice president of marketing.In the fourth quarter, strong top-line net and same-store sales, as well as substantial gross margin expansion, allowed Saks’ profits to improve by more than a fifth. For the three months ended Jan. 31, Saks said net income shot up 20.1 percent to $81.8 million, or 57 cents a share. Excluding special items accruing to 13 cents, Saks’ EPS would have exceeded the Wall Street forecast by 2 cents. Last year, by comparison, Saks had earnings of $68.1 million, or 47 cents.
Consolidated sales increased 6.9 percent to $1.97 billion from $1.84 billion a year ago, and same-store sales advanced 6.9 percent.
By division, the department store group saw operating income grow 5.9 percent to $125.2 million on a 3.8 percent rise in sales to $1.2 billion. Same-store sales improved 3.2 percent. At Saks Fifth Avenue, operating profits escalated by 32.3 percent to $70.3 million on 12.2 percent climb in sales to $765 million and a 10.4 percent same-store sales gain. The results in the division would be credited to programs administered by then SFAE ceo Christina Johnson, reporting to Martin and Sadove. She left the company last October.
For the full fiscal year, Saks Inc.’s net income more than tripled, shooting up 241.6 percent to $82.8 million, or 58 cents, from $24.2 million, or 17 cents, a year ago. Excluding an accounting change in the prior year, net income would have increased a more modest 18.6 percent from $69.8 million, or 48 cents.
Consolidated sales increased 2.4 percent to $6.06 billion from $5.91 billion and same-store sales advanced 1.6 percent. February same-store sales increased 14.7 percent at Saks Inc., with a 25.2 percent jump at Saks Fifth Avenue and an 8 percent increase at the department stores. However, that’s off a low base from February 2003 due to the war in Iraq and some bad weather.
Sadove said improvements were due to better inventory investments and more focused directions. According to Martin, Sadove is expected to “foster an enhanced connection between the operations of our two principal business segments and our central corporate support group, including information technology, credit administration and logistics, as well as provide leadership on key business processes such as strategic planning and human resources policies.” Martin also sees greater alignment between the corporate staff and sales support groups.Prior to joining Saks in January 2002, Sadove held posts of increasing responsibility with Bristol-Myers Squibb Co. between 1991 and 2001, including president, Bristol-Myers Squibb Worldwide Beauty Care and Nutritionals. Among other accomplishments at Bristol-Myers, he developed Clairol into a leading hair care business. From 1975 to 1991, he worked at General Foods USA.
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