Saks Fifth Avenue’s president and chief executive officer Marc Metrick has some reassuring words to vendors about the health of the luxury retailer.
“Over the past six weeks, our business has increased over the same period last year, with stores and online running positive comps,” Metrick said in a letter to vendors on Friday.
“I’ve had the privilege of visiting several of our reopened stores and as we look at our competitors, some of which are still in the process of reopening, Saks continues to set the standard for providing a safe, easy and personalized luxury shopping experience.”
Last month Saks reopened all 40 of its stores in the U.S. and Canada. “We are pleased to see that business is rebounding and exceeding our expectations,” Metrick wrote.
Other major retailers, including Macy’s Inc., have said that while business is way down due to the pandemic, it’s exceeded their expectations since stores began reopening in recent weeks. Now retailers are concerned that stores around the country may have to close again due to the spike in coronavirus cases in many states.
Metrick’s letter, obtained by WWD, was an apparent effort to reassure vendors about the condition of his company and ability to navigate through the pandemic, and provide some transparency into the business. Metrick does furnish business updates to vendors, but last February, Saks’ parent company, the Hudson’s Bay Co., went private so it no longer reports financial results publicly.
The pandemic has also obscured the outlook for Saks and all retailers selling nonessentials, leaving vendors extremely cautious and uncertain on how to deal with stores. Saks, as market sources have noted, has been canceling orders, delaying payments and even seeking merchandise on consignment, meaning requesting goods without paying for them until they are bought by shoppers.
One vendor complained that since Saks went private, it’s harder to get a read on the store’s financial condition and have orders factored. Consequently, “I won’t ship to Saks without getting paid in advance. I can’t afford to take another hit. I got burned by Neiman’s,” said the source, referring to the bankruptcy declared by the Neiman Marcus Group on May 7.
However, two financial sources indicated Saks’ financials are shared with factors quarterly, orders are being approved, though the access Saks provides to its financials is limited.
According to the vendor source, pre-pandemic, Saks was on a 30-day pay schedule, but extended it to 120 days during the outbreak and is down to 60 days. “Whatever money Saks owed us, they are paying,” the vendor said, referring to June orders for November and December holiday deliveries. “There is ordering for holiday but it’s light.”
While Metrick cited positive comps for the last six weeks, the vendor source had a different take on the brand’s business at Saks: “It’s not even close to last year. Women’s is not fabulous. September will be the big test.”
“Saks’ e-com has been healthy, but highly promotional,” said another executive at a brand that sells Saks. “At the stores, when they started to reopen around mid-May, business was getting better and better until week four when there was a resurgence of coronavirus cases. Then there was a very quick drop off. Another major retailer confirmed the same pattern to me. But there have been some really good pockets of business at Saks, like men’s contemporary, and men’s shoes, probably driven by sneakers.
“We do drop ship for Saks as customers buy the merchandise,” said the fashion executive. “It wouldn’t surprise me if they extend that to more categories to lessen their inventory liability.”
“We are shipping Saks,” the executive added, noting that as far as any outstanding payments from Saks, “We’re pretty much caught up. They have extended their terms as most [retailers] did. It’s pushed out to 60 to 90 days.”
The source said strategy meetings between Saks and vendors on plans for 2021 will be held in the next few weeks. Saks and other retailers will be benchmarking 2021 plans against 2019, and looking at 2021 down 10 to 20 percent, the source said.
Metrick, seemingly looking to disassociate Saks from its competitors, stressed, “It is important that we do not paint the entire industry with a broad brush as there are some of us who have been forward-thinking, even prior to the pandemic, and are continuing to exceed the demands of today’s consumer.”
For fall, Metrick said he is “cautiously optimistic, but energized nonetheless.”
“Across the fleet,” Metrick wrote, “we are working to strike the right balance between providing a safe environment while also offering fun and escapism. To do that, we’re innovating with new services, such as off-hours appointments, virtual styling appointments and events, and same-day delivery to the Hamptons so that customers can enjoy the experience of luxury shopping however they feel most comfortable.…We have been seeing both new and existing customers responding well to our enhanced safety protocols and taking advantage of our new service offerings, with a particular affinity for off-hours appointments and concierge services.”
While casual products are selling best, Metrick cited “an increased interest in fashion. In our stores, handbags, women’s shoes and men’s wear are in high demand and performing well. Men’s continues to be one of our strongest categories, especially as our customers are rethinking their wardrobes and shifting to more casual wear given the current circumstances.”
Saks’ digital business has been “strong and we’ve seen an influx of new customers online…Overall category performance has been consistent with what we’ve seen in stores. Additionally, beauty has been performing exceptionally well.”
In other news at Saks, Metrick cited:
• The formation of a Diversity and Inclusion Advisory Council, comprising a cross-section of Saks corporate and field associates from underrepresented populations.
• Saks continuing to become “an independent operating company” by moving several functions previously under a centralized HBC corporate structure, into Saks. HBC in the last couple of years shed several holdings including its European retail operations, Lord & Taylor and Gilt Groupe, reducing the need for centralized operations.
• Bringing back furloughed workers in a phased approach.
• Ongoing full remodels of the Bal Harbour, Fla., and Beverly Hills stores, while other construction projects have been put off.
• Launching a revamped saks.com in the fall with more personalization, tailored product recommendations, curated content, improved site speed and search functionality.
• Investing in an innovative customer data platform to leverage “supercharged” analytics to better serve customers.
Metrick said Saks’ cash position “remains on a solid footing,” adding, “When the crisis began, we, like many of our peers, initiated a process to raise incremental liquidity, not knowing the severity of the pandemic and where it would take us. Ultimately, given we are in a stronger cash position than expected, we are happy to have not rushed into raising incremental liquidity at expensive rates and on restrictive terms.
“As you know, Saks, and our holding company, HBC, have substantial assets, including valuable, unencumbered real estate,” Metrick wrote. “While we do not need supplemental liquidity at this time, we have the ability to add it to our business should the need arise.”