SAKS HOLDINGS EXPECTS SALES TO REACH $3 BILLION BY 2000
Byline: Thomas J. Ryan
NEW YORK — Saks Holdings Inc., the parent company of Saks Fifth Avenue, expects to reach annual sales of $3 billion by 2000, with growth propelled by new stores and expansions in California, metropolitan New York, Texas and Florida.
That forecast was made at Saks’ first annual meeting with analysts, held last week at Saks headquarters here, according to Wall Street research reports on the meeting.
The $3 billion goal would represent a 36 percent increase from last year’s $2.2 billion in sales.
Among other projections by Saks:
Earnings per share are seen running up 25-30 percent annually through 2000.
Total sales growth of 11-13 percent a year, mid-single-digit same-store gains and a 0.5 percent improvement in operating margin are expected to drive the earnings expansion.
Sales per square foot are expected to reach approximately $370 this year, a 5.4 percent leap over $351 in 1997. Saks’ goal is $400, in line with its chief competitors, Neiman Marcus and Nordstrom.
“What came through loud and clear was the depth and quality of the Saks team’s management,” wrote Stacy Pak, retail analyst at Credit Suisse First Boston, echoing several others who heard presentations from nine senior members of Saks’ executive ranks.
According to analysts who attended the meeting, Philip Miller, Saks chairman and chief executive officer, said business at the core full-price stores continues to be fueled by preferred-customer programs: SaksFirst, Fifth Avenue Club and the new Premier plan. The meeting was for members of the financial community only. Journalists were barred.
Saks Premier, launched in April, targets customers spending between $1,000 and $1,900 a year at Saks.
The retailer is estimating that group of consumers will spend $142 million at its stores this year, compared with $124 million in 1997.
Meanwhile, SaksFirst, whose customers spend at least $2,000 annually, saw sales climb to $594 million in 1997 from $418 million in 1994. And Fifth Avenue Club, whose average customer spends $15,000 a year, built up sales to $121 million last year from $72 million in 1994.
Saks said 75 percent of its volume was produced by 55 percent of its customers in 1997, compared with 67 percent from that group in 1994.
At the same time, Saks said revenue produced by its sales-driven shoppers, or “value strategists,” was slashed to 12 percent of sales in 1997 from 25 percent in 1994.
Reiterating goals mentioned at the firm’s annual meeting this month, Brian Kendrick, vice chairman and chief operating officer, projected Saks will add $700 million in volume via growth in California, Texas, Florida and New York.
In addition, analysts noted that Jeanne Daniel, Saks executive vice president of merchandising, identified four primary growth opportunities: bridal, home gifts, jewelry and children’s.
Analysts said that Ron Coven, senior vice president of Saks’ Off-5th division, said that the off-price chain should see about 41 percent of its business come from designer goods this year, versus 18 percent in 1997.
Saks has raised its purchasing of designer goods specifically for Off-Fifth — as opposed to items that are slow movers at Saks and wind up at its off-price arm — in part because of the turmoil in Asia and weaker demand for upscale apparel there.
Saks also told analysts it is changing the way it calculates same-store sales, to include expansions.
Saks currently doesn’t include stores with expansions greater than 25 percent and pointed out that many other retailers include all expansions. Expanded sites are typically the most productive, and excluding them depressed Saks’ same-store sales comparisons.
On the new basis, same-store sales would have been up 6.2 percent last year versus 5 percent under the old method, and 8.9 percent in the first quarter against 6.4 percent.