AS SAKS SEEKS LIFT, NEW CEO SETS TACTICS TO POLISH LUXE APPEAL

Byline: David Moin

NEW YORK — For Christina Johnson, if image wasn’t everything before, it’s top priority now.
Since ascending as president and chief executive officer of the Saks Fifth Avenue chain in February 2000, and last month to president and ceo of the entire Saks Enterprises — stores, catalog, Internet and outlets — Johnson has been determined to lighten up the profile of a recently bruised Saks Fifth Avenue, and raise her own profile as well.
She’s redirected advertising, escalated fund-raising efforts, hired the Gallup Organization to survey opinions of customers and all 15,000 store associates to understand their concerns, put a “full-court press” on private label production, while visiting showrooms to introduce herself and reassure a nervous designer community that rumors about curtailing them are false. She’s recasting Saks Fifth Avenue to be, as she says, the “accessible luxury” chain.
“That’s really our strategic mission,” she said during an interview in her office. “We believe that we have the opportunity to purvey luxurious, fine quality products and that we can do that in an environment that is warm and inviting, and delivers what our customer expects from us.”
Some think she’s got an uphill climb, as she emerges from under the shadows of the debonair Philip Miller, the former ceo who continues as chairman but no longer runs the company, and Rose Marie Bravo, the star merchant and former Saks president who left to run Burberry. Such reputations would be hard for anyone to follow. And like President Bush, Johnson ascended just when the economy softened.
“She’s been dealt a tough hand in terms of repositioning the business,” said Robert Kerson, president of global retail-fashion practice of Korn/Ferry International. “She came in at a time when she will be very, very challenged.”
However, Kerson added: “She’s really disciplined and driven. She balances strategy and risk well, though she’s not really a risk taker. She’s smart, tough, but a fair manager, and a very good generalist, with a blend of operating and merchandising experience. People are just starting to know her, and she’s just starting to get public attention. Customer acceptance of the Saks name might have eroded, but it still has tremendous brand recognition. The more visible she becomes, the better it is for Saks.”
Others in the industry describe the 48-year-old Johnson as more bottom-line-oriented and cautious than past regimes; a strong administrator who’s pragmatic in demanding results; cool under pressure; and balancing a career with home life in Greenwich, Conn., where she is a wife and a mother of two daughters. Some say she’s well served by a personality that can be both tough and charming, and a big, beaming smile.
“She brings stability,” said one consultant to the store. “I don’t see enormous change ahead. It’s more about perspiration, meaning hard work, rather than inspiration. If anyone knows the company, it’s her. She’ll try to keep up the quality, though lately luxury stores, not just Saks, have not done as well, because of the stock market, the economy and everything else. The next six months could be a struggle.”
Working at Saks since 1991, Johnson rose methodically up the ranks primarily through the store operations and selling side. She does have 17 years experience in merchandising cosmetics and fragrances while working at Carson Pirie Scott and Marshall Field’s. Subsequently, she ran the catalog business for Field’s, where she also served as general merchandise manager of home furnishings. In addition, she has exposure to ready-to-wear and accessories on the selling side, having served as head of Saks Fifth Avenue stores.
She was named vice chairwoman in September 1998, added the chief operating slot in May 1999 and upon becoming ceo a year ago, said there would be no change in the general strategy — keeping Saks focused on 35- to 55-year-old, affluent, fashion-minded women, while growing square footage in the low-single digits, through renovations, expansions and a few openings.
Is she a merchant or an operator? “I’m a combination,” she replied. “I have been very fortunate in my retail career. I have had every [kind of] job possible. That has been a great stepping stone for the role I currently hold. The majority of my background is in merchandising.”
Asked if she is risk-taker, Johnson said: “Saks has to take risks, if you are talking about assessing what new lines to engage or assessing what new market places to engage. Understand that there are only a few of us [retailers] that have a national presence. So therefore, the assessment of new marketplaces, of new formats, is extremely important. For us, it’s not just risk taking in merchandising content, we have to constantly envision what’s the next location for Saks and the right format for Saks, long term. We have four different formats [full line, Main Street, outlets and resort], which we operate quite successfully. These formats give us a strategic advantage. So, I think I am absolutely a risk taker. I like to think I am a prudent risk taker.”
She helped develop long-term strategies, including the four-sided real-estate program, when she was more of a behind-the-scenes player, and also as a member of the executive and operating committees.
“The ‘evolution’ of Saks continues under my leadership,” she said.
Her biggest challenge is the “definitive slowdown in the economic environment for the first time since the early Nineties. This does not change or mitigate our strategic plan. It remains very much steadfast, but what it does mean is that we have to be smarter, quicker, more aggressive in executing our plans to insure that we retain a significant share of the customer’s wallet.”
The share seemed to slip last quarter, when comp-store sales declined 3.4 percent at Saks Fifth Avenue Enterprises, while for the year, they rose 3.4 percent. Sales in January were down 2.5 percent, but up 2 percent in February with a lift from spring goods.
Saks was further blemished when its planned spinoff from the parent, Saks Inc., which also runs moderate department stores in secondary markets, was aborted. Saks Fifth Avenue was bought by the Birmingham, Ala.-based Saks Inc., formerly Proffitts, in 1999 from Investcorp. Though some have questioned whether the acquisition has done much to enhance the brand, Johnson said the affiliation has benefited Saks Fifth Avenue “far better than any financial partner.”
When it comes to capital expenditures, a $100 million renovation of the Fifth Avenue flagship is under way. So are some branch renovations and a few store openings, with plans to add 3 to 4 percent more square footage over the next three to five years. That’s significant, considering the increase comes off the existing base of roughly 7 million square feet of full-line store space, including 1.5 million that’s been expanded or renovated since 1995.
“Now, it’s down to carefully assessing the right marketplaces,” for openings or additional redos. “This fall, we’ll open Columbus, Ohio, and Birmingham — both full-line,100,000-square-foot stores. We are also looking to renovate and remodel several of our current stores, one is Dadeland [Miami]. We’ve done a huge outreach.”
Only 15 or 16 stores, she said, still need renovations, out of the 62 full-line stores. Saks Enterprises also operates 49 Off 5th outlets, the Folio and Bullock & Jones catalogs and saks.com
Saks Fifth Avenue’s most important weapon in the battle for the luxury customer is the flagship. Asked if the renovation project is moving as planned, Johnson said: “Yes, we are pacing nicely through our schedule. Saks Inc. has been the best possible partner for Saks Fifth Avenue Enterprises, consistently supportive of our growth needs. They understand our position as a luxury brand.”
As for the flagship, “the majority of the expenditures is already set. There is no other retailing presence like our flagship in the world. We are so fortunate to have that 650,000-square-foot building across the street from our headquarters, because it is such an icon. We are doing more than ever to maximize the use of that icon in support of our brand. The renovation of that store is a good case in point. We are getting there. We are closing in.
“In March, we will open our men’s sportswear floor on seven, and then start construction on the tower side [adjacent to the primary building] of six, readying it to take on men’s furnishings and dress furnishings, which will come off our main floor. That’s when the public really gets a feel for what we are doing, because at the end of October, we will then open a magnificent stand-alone fine jewelry environment. That’s critical this year. And then in ’02, we attack the main side of the main level,” which sells accessories and cosmetics.
However, Johnson cautioned: “Every ceo has to be carefully watching capital expenses and working capital. I would very carefully review our capital expenditures in light of a slowing economy.”
As the floors get reworked, Saks is also polishing the brand image, which officials admit has been too austere, with ads taking style too seriously, rather than projecting a youthful, fun message or lifestyle. That’s why Johnson orchestrated a redirection in the marketing, leading to the new advertising tag line: “Live a Little.” It replaced the long-standing “Defining Style” ad campaign and its product-specific orientation, and will be tied to charity shopping events that promote, “Give a little.”
The private label push is also on Johnson’s agenda, with younger styles and new shops beginning to pop up in the stores.
“Private brand is one of the most important strategic initiatives we have entered,” she said. “It’s been under way now for just about 18 months. We have had tremendous growth in our private brand and subsequently very high margin returns off those businesses.” Private label represents 15 percent of women’s apparel. In men’s wear, the percentage is much lower, since the program is newer, though Johnson estimated men’s will rise to the 10-12 percent range.
“We have two very strong brand components right now. One is Real Clothes, which we’ve talked about a great deal, but the newness there is with brand extension. We’ve just put the offering together for the first time for children’s wear in the fall. It’s been a big success for us. There also is potential in footwear, accessories and handbags with the Real Clothes name on it. It predominately has been a casual lifestyle brand and we are evolving it into career as well. So, this brand has tremendous growth potential.
Eighteen months ago, Real Clothes “had slipped on us greatly. The brand has grown during that 18-month period, we have generated about a 22 percent increase since, which is solid, considering it is a very large base.”
While Real Clothes represents the lion’s share, the private label program also includes the 5/48 collection, as well as a cashmere line and accessories under the Saks label.
“You know the department-store business has been filled with private brand for a long time. We have been in it, but until 18 months ago, we hadn’t put a full-court press behind it,” Johnson said.
“The other brand we are terribly excited about is Bullock & Jones, the men’s store that we bought in San Francisco. We launched that as a proprietary brand also in the fall. It is right now our number six men’s line with only 20 of our 62 doors involved. We started a limited rollout. It has tremendous ability for brand extension in shoes and belts, and you’ll begin to see that this fall. It is a traditionally classic men’s venue that is really aimed at SFA’s core customer base, and has been very well received. You have a strategic rollout of the brand over the next year into the majority — if not all — of our stores and it will become like Real Clothes, a significant volume producer and margin supporter.”
Those initiatives, Johnson stressed, come without diminishing designer offerings.
“Saks Fifth Avenue is a luxury brand,” she asserted. “The designer business, whether it’s ready-to-wear, sportswear, handbags or accessories, is the linchpin of our strategy. It’s first and foremost in our merchandising, and we’re currently accelerating the growth of designer at a rate exceeding all other categories, except private label.”
“We carry just as much luxury product as Neiman Marcus. I know that for sure.”
When reports of Saks designer cutbacks were running wild, a Saks Inc. placed the women’s designer business at 14.5 percent of Saks’s overall $2.4 billion in volume in 2000, representing a “fringe” reduction from 15 percent in 1999. Last week, Saks Fifth Avenue said the figure in women’s designer merchandise currently stands at 17 percent.
Designer Josie Natori says her business has grown in double digits at Saks over the year, and that she is delighted by the store response to her new Josie line.
“It’s younger, kickier, as contemporary as can be,” Natori said. “In less than a year, we’ll do $1 million with it at Saks. Saks does have that customer. There is that serious second floor and third floor [for designer sportswear and collections] including the really high end of Natori. With Josie, Saks can go to other levels.”
After Johnson visited Natori’s showroom, the two had lunch for first time last month at Saks. “I didn’t know her before, when she was more in operations,” Natori said. “She is making an effort to get to know the people in the business and understand the business. That is very comforting. As a woman, she can relate to my products. But because she was in operations, she wasn’t exposed as much. You have to give her time. I would say people like her.”
Last fall in Beverly Hills, Saks took its designer business one step further by creating an advanced floor housing Ann Demeulemeester, Olivier Theyskens, Martin Margiela, Sebastien Rodriguez and Veronique Branquinho. “It’s a whole new environment for us,” said a Saks official. “It’s a complete departure but very appropriate.”
It remains to be seen if the concept is replicated at other Saks stores.
“The thing that plagues any retailer today is that it’s very hard for us to differentiate product,” Johnson said. “That gets into the talent piece. Finding merchants that have an understanding of merchandising and content is challenging, as well as being able to find unique differentiating product to fill the stores.
“Recruitment and retention of high quality talent for any organization today is difficult. In our organization, we have done significantly better in reducing turnover and improving our retention. We have made it our top priority. We have put the financial wherewithal behind it, and really done a lot in terms of listening to what our associates expect from us as an employer,” such as bringing in Gallup.
“We’ve put together an entire team of great talent,” she added. “We’ve never been better poised to grow Saks Fifth Avenue’s business. The Saks Fifth Avenue brand is a huge recruitment tool,” but the company maintains a “strong desire” to promote from within.”
It worked for her.