Saks Fifth Avenue is close to finalizing a $200 million to $250 million renovation program for the Manhattan flagship as it strives to catch up to the competition.

This story first appeared in the April 3, 2014 issue of WWD. Subscribe Today.

According to sources, Saks will transform the main level to a bigger and more powerful cosmetics presentation, extending the category further east through the bulk of the floor. Saks’ cosmetics floor is already among the most popular and productive in the city, with sources saying only the Macy’s and Bloomingdale’s flagships with larger cosmetic floors generate more volume. Macy’s and Bloomingdale’s have completed dramatic overhauls of their own beauty floors, with Macy’s finished last fall and Bloomingdale’s a few years ago.

Under the renovation plan, Saks would leave room for about four major luxury and designer handbag shops on the main floor, which would be built as duplexes, similar in some respects to presentations seen in stores in Europe, and more recently at Macy’s Herald Square, which has Gucci, Louis Vuitton, Longchamp and Burberry forming a luxury wing on the Broadway side of the store.

The balance of handbags and jewelry at Saks would move to the second floor, where designer sportswear is located and could be consolidated. “Making the second floor a productive space for handbags could be a home run,” said one source familiar with the Saks flagship. Upper floors, including eight and nine, will also be transformed.

Physical changes at the Saks flagship are necessary to take it to the next level of business. Accessories and jewelry on the main floor are cramped and underspaced, and there are brands that Saks would like to start selling.

A Saks spokeswoman declined to comment on the upcoming changes at the flagship, other than saying the renovation plan is “a work in progress.” Today, parent HBC is set to disclose fourth-quarter results and could discuss plans for Saks.

In recent years, Saks has tweaked its cosmetics and fragrance space, including putting in new Chanel areas. With the chain’s acquisition by HBC, led by its chairman Richard Baker, and Baker’s recruitment of Marigay McKee from Harrods as Saks’ new president, there’s an emerging master vision for the flagship and the rest of the chain. Sources have speculated that the ground floor at Saks could be redone by sometime in 2015.

One former luxury executive suggested enlarging the beauty floor could have consequences for Saks and its strategy to elevate the luxury appeal. “Trying to have the largest cosmetic business in New York to compete against Macy’s and Bloomingdale’s could create an environment that’s frenetic. I would question whether that’s really what you want if you want to be seen as luxury retail. When Barneys and Bergdorf’s both elected to put beauty on the lower level, it created a sense of differentiation and, with the space that opened up on other floors, gave them more of a luxury ambiance.”

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