Saks Fifth Avenue had a strong third quarter and sees momentum continuing this holiday season, bringing some initial confidence to the company that its reengineered business model operating with separate e-commerce and store companies is working out.
That’s the essence of the latest quarterly letter to vendors from Marc Metrick, chief executive officer of the Saks e-commerce business, a copy of which was obtained by WWD.
In March Saks disclosed that it split the Saks Fifth Avenue store fleet and saks.com into separate companies, and that Insight Partners, a venture capital and private equity firm, made a $500 million minority equity investment in the Saks e-commerce business, valuing it at $2 billion. The company believes the split will enable the dot-com business to grow faster and become more profitable, potentially go public, and that consumers won’t notice that the Saks brand is divided into two separate companies.
“With the end of the holiday season right around the corner, we remain highly optimistic about our performance and growth trajectory,” Metrick wrote in his letter dated Dec. 10, which provided vendors a selective array of performance metrics for the third quarter for both saks.com and the Saks Fifth Avenue stores, as well as a business outlook.
For the third quarter ended Oct. 30, “On a gross merchandise value basis, online sales increased 56 percent over 2020 and 84 percent over 2019, driven by higher site traffic, sales conversion and inventory,” Metrick wrote. “Traffic was up 32 percent [compared] to 2020 and 88 percent to 2019, and new customer counts grew by 54 percent to 2020 and 122 percent to 2019. Sales across all merchandise categories grew with standout performance in men’s, women’s accessories and eveningwear, and beauty and fragrance.”
At the Saks stores, comparable sales on a gross merchandising value basis were up by 30 percent to 2020 and nearly 24 percent over 2019, Metrick reported.
“Top-performing locations have been consistent over the course of the year, including Atlanta, Troy, Houston, Boca Raton and Chicago. We saw the strongest performance on a category basis in men’s and handbags. Across the fleet, we are seeing that top customers are returning, associates are highly productive and traffic is normalizing. For example, store traffic in nearly all locations has been outperforming each quarter compared to last year and is rebounding closer to 2019 levels. Specific to New York, traffic has been improving on a weekly basis throughout the fall thanks in part to an increase in domestic tourism and the more recent opening of U.S. borders to international travelers.”
Metrick addressed industry curiosity on how splitting Saks e-commerce and store operations into separate businesses is working out. The maneuver is controversial, with industry experts divided over whether it will be successful or not in the short and long terms. “While separate businesses, both e-commerce and stores continue to work together to deliver a frictionless experience to customers,” Metrick wrote. “This model works as reinforced by key stats: 44 percent of online returns were made in stores and 21 percent of online orders were fulfilled by stores.”
Regarding holiday selling, Metrick indicated that it has been happening earlier this year, and that during the first three weeks of November leading up to and around Thanksgiving, there’s been “outsized” performances in outerwear, women’s shoes, handbags and holiday gift sets. “On Black Friday, we set record highs for traffic, customers, volume and transactions, which proved to be our largest demand day ever, up over 50 percent to 2020 and more than double to 2019,” Metrick wrote.
At the stores, he said comp sales were up more than 50 percent to 2020 and high single digits to 2019 for Black Friday, driven by men’s wear, fragrance, women’s shoes and jewelry. Top-performing locations were Philadelphia; Greenwich, Conn.; Birmingham, and Dadeland and Boca Raton in Florida.
More than $200 million will be invested in stores over the next three years, on top of about $800 million already spent since 2015, Metrick indicated.
The company, continuing to expand its assortment, will add more than 70 brands in the fourth quarter and “many more expected in 2022,” Metrick indicated. The mix is growing through a combination of wholesale, drop ship and marketplace relationships.
Noting the strong consumer demand retailers industry-wide have been experiencing this year, Metrick said the company is “confident” in its fulfillment strategy for the peak holiday season, citing the recently-opened Middletown, Pa., fulfillment center and support of the Saks stores. “With the continued high demand, we’re being nimble in our strategy and employee incentive programs to ensure we are well-positioned to deliver orders during this busy time of year,” he wrote.