Saks Fifth Avenue has cooked up a new strategy for growth — 10,000-square-foot stores specializing in accessories, cosmetics, fragrance, hosiery, women’s shoes and jewelry in markets where Saks does not operate full-line stores. It’s a plan that would capitalize on the Saks brand name and on its highest-margin, highest-traffic categories.
If Saks does proceed with the strategy, most likely just a few stores would open initially to test the concept. However, store officials cautioned Wednesday that there has been no decision to launch the concept and no deals for real estate have been signed.
In response to an inquiry from WWD, Brian Martin, executive vice president of law and real estate for Saks Inc., issued this statement: "SFA currently has a wide variety of store sizes ranging from 11,000 square feet in Southampton to over 500,000 square feet in the New York City flagship. Specific store sizes are tailored to individual markets and revenue opportunities. We could open some smaller stores over time, but opening a series of 10,000-square-foot stores is not a specific growth strategy for the company at this time." Martin is the brother of R. Brad Martin, chairman and chief executive officer of Saks Inc., parent of Saks Fifth Avenue Enterprises.
Still, one source with access to the Saks Fifth Avenue plan said the "main-floor" concept targets households with at least $100,000 in annual income that are"attitudinally predisposed toward spending on fashion." The source also said that communities in Oklahoma City; Nashville; Omaha; Tucson; Baltimore; San Jose; Salt Lake City; Louisville and Lexington, Ky.; Milwaukee-Racine, Wis.; Buffalo, and Seattle, would be considered.
Sources said cosmetics would be given the most space, with about 2,200 square feet, while women’s shoes and handbags would each have 1,750 square feet. Other categories would be given less space.
One analyst sounded upbeat about the plan and said that Saks would be willing to experiment with a new box.
"This could put Saks in many locations, and it’s a sign that Saks is looking ahead to a time when the consumer will be in a better mind-set for shopping," the analyst said. "It could work to reinforce Saks’ brand strengths, depending on the location. They could even put in 5,000-square-foot shops in hotels."Luxury retailers Saks Fifth Avenue and Neiman Marcus already operate traditional full-line stores in most affluent markets that could support their stores. Therefore, they must come up with new concepts for growth. A few years ago, Neiman’s launched a concept called Galleries, which are small units selling jewelry, gifts, tabletop and other home products. Galleries has been a disappointment, a Galleries unit in Seattle was closed, and two are left, in Phoenix and Cleveland. Neiman’s officials believe there are other potential growth spin-offs of the Neiman’s brand, but not necessarily Galleries.
Saks Fifth Avenue Enterprises operates 61 stores and 52 Off-5th stores. Saks’ fortunes rest heavily in its big downtown stores, like Manhattan and San Francisco. Since major urban areas have been hit hard by the drop in tourism and the tough economy, Saks needs to explore new geography.
Despite the glitches, Saks Inc.’s fourth-quarter net income rose 26.2 percent and the Saks Fifth Avenue division’s profits, before special items, increased fivefold to $53.1 million during the quarter, while sales decreased 5.9 percent.
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