Saks CEO Talks Fashion, Flagship and the Go-Forward Agenda

For the holiday 2020 season, Saks Fifth Avenue isn’t following the pack.

While many retailers, desperately trying to navigate the health crisis, have already started or will start the push to sell holiday gifts four to six weeks earlier than last year, Saks isn’t rushing into it.

“Our gifting story starts about the same time. It’s mid-November when we start the push. We’re not moving it up,” Marc Metrick, president and chief executive officer of Saks Fifth Avenue, said. “Saks approaches holiday a little bit differently than Lord & Taylor and Macy’s.”

Aside from discussing holiday 2020, Metrick in a wide-ranging Zoom call interview, said online sales are up by double digits; brick-and-mortar is flat, and the Fifth Avenue flagship is having a tough time, though he contended Saks is capturing market and beamed about men’s wear as the best-selling department.

Saks has been mostly mum on its plans for rolling out Barneys New York shops and opening a 100,000-square-foot Saks store in the American Dream retail and entertainment complex in New Jersey. Metrick said both projects are advancing. The Saks store is seen opening no sooner than March 2021, and Saks is likely to recast its contemporary departments as Barneys, which last November was bought out of bankruptcy by a new owner, Authentic Brands Group. Barneys already has a presentation on saks.com.

Regarding holiday plans, trim installation begins Oct. 16 at the Manhattan flagship, an FAO Schwarz portion of the holiday shop goes up three days later, and the holiday campaign starts Oct. 28. But it’s not until mid-November when holiday will be in full swing at Saks, with visuals by then completely in place at the flagship, and on Nov. 23 when the holiday windows and light show begins. For years, the unveiling of the flagship’s holiday windows and the laser-light show on the facade drew packed crowds on Fifth Avenue and in Rockefeller Center. With COVID-19 and the necessity for social distancing, that can’t happen this year, so the format will shift from a single launch event to a 20-night celebration that will be livestreamed and on social media.

Saks’ 600,000-square-foot flagship is critical to the health of the retailer overall. Pre-pandemic, it accounted for about 25 percent of the luxury retailer’s $3 billion in annual volume. This year, the flagship is lagging. “Overall the stores’ business for Saks has been unbelievable — flat to modestly up for the last 90 days. New York is not the driver of that. New York is having a tough time. We need to think about New York in a different way,” Metrick acknowledged.

Certain other stores within the Saks fleet have been strong, the ceo said, citing Philadelphia; Troy, Mich., and Atlanta as examples. He said people in cities such as those would in normal years come to New York on business or to see friends and family, which is hardly happening this year, impacting business on Fifth Avenue. Domestic and international tourism to New York City has dried up due to COVID-19.

“There’s just a geographic shift” to where people are shopping, encouraging Saks to step up localization efforts at branch stores, such as clienteling and conveniences such as buy online, pick up in stores, to drive greater local business, the ceo said.

Metrick said he’s seen no business pickup in Manhattan since Labor Day, attributing the stagnation to delayed school openings, a virtual and much subdued New York Fashion Week, and people staying longer in the Hamptons. September in New York this year was a tougher period for Saks than in August, he said.

Metrick said he’s “cautiously optimistic” for the holiday season, but didn’t get specific. What could help is a string of product launches this fall including JW Anderson and Maison Margiela in women’s designer; Simon Miller in contemporary; Sharon Khazam and Spinelli Kilcollin in jewelry, and Byredo and 111 Skin in beauty.

Regarding business overall, “We are very pleasantly surprised how well things are performing for us. I do believe we are taking share,” said Metrick. “Our stores are essentially flat to last year for the last 90 days. Our online business is unbelievable and way up compared to this period last year,” he said.

But since Saks’ parent company, the Hudson’s Bay Co., went private last March, quarterly sales and profit results are no longer publicly reported, making it hard to get a read on how Saks and its sister divisions — Saks Off 5th and Hudson’s Bay in Canada — are performing. The last set of figures released for HBC overall were for the third quarter of 2019, when sales tallied 1.82 billion Canadian dollars, down from 1.86 billion Canadian dollars a year ago, with a 1.7 percent comparable sales decrease. Earnings before interest, taxes, depreciation and amortization declined to 40 million Canadian dollars from 84 million Canadian dollars a year earlier.

When Saks’ stores began reopening in the spring after shutting down in March due to the pandemic, “the connectivity” between bricks and clicks became very apparent, Metrick said. “When our stores reopened our online business got even better. It’s an ecosystem.”

Saks.com has just been overhauled. “About two weeks ago, about 5 percent of our traffic began experiencing the new site,” Metrick said. It’s now up to 25 percent, he added. He said the site is faster, can handle much more volume and traffic, is more responsive and has a streamlined search capability. The search is more user-friendly, and the look and imagery have been enhanced. “Over the coming months, the Salesforce e-commerce cloud will enable us to push personalization efforts.”

Whereas stores like Macy’s, Target and Bloomingdale’s are major holiday destinations, Metrick characterized the Saks experience by saying, “We are the comfort. We are the treat. We are the splurge.” He suggested a significant portion of Saks shoppers, who can’t go to sporting events, the theater or travel for holiday due the health crisis, will use that money saved to shop more for themselves and others during the holiday season.

“If you look at the breakdown of our customer base, we are seeing outsized growth in our most aspirational bucket of customers,” Metrick said. It’s different with Saks’ “core customer,” he noted. “Our core customer is still spending,” but they’re not buying the gowns, the jewelry, the evening shoes because amid the pandemic, the social calendar is empty — no in-person charity galas, art auctions, or award ceremonies. They went virtual.

Saks differentiates its aspirational from the core customer based on frequency of shopping and tiers of spending. “If you look at our top customer, they visit us twice a month. Aspirational customers can come twice a year, and obviously are not spending as much.”

Asked where the pockets of fashion strength are, Metrick said, “We are seeing obviously very strong growth in the men’s business,” which he attributed to the spending shift from experiences to luxury. “It’s much more pronounced in men’s wear, but we have seen that phenomena across all of our aspirational customers. This has given us a short-term opportunity to get some share,” and a “long-term opportunity” to get consumers more into shopping at Saks.

Metrick further attributed the surge in men’s sales to men rounding out their closets with “intermediate” wardrobes. “Men have had two wardrobes. Clothes to bop around in, go to the soccer game with their kids, and another wardrobe to go to work or the office. Some haven’t had intermediate wardrobes at all,” meaning casual clothes for situations where they don’t want to wear a suit for work or a tattered shirt for a Zoom call.

He said the men’s sneaker craze has accelerated during the pandemic; women’s footwear and handbags categories have performed well; fragrances have been “reborn,” and men’s denim is “amazing” and generates more volume than all of men’s tailored combined. “We’ve been talking about men’s for five years. Saks specifically compared to the competition took a very distorted approach to the men’s business.”

On the other hand, the color cosmetics side of beauty, men’s tailored including trousers and blazers; women’s eveningwear, evening bags and evening shoes are underperforming. “Occasion dressing is going to come back around, but it’s not going to be a return to where we were.” The women’s contemporary sportswear business is hanging in.

There’s been reduced staffing at stores, though Metrick said it’s been “probably not as significant” as cuts made at other stores. “We’ve taken about 20 percent of the hours out, but that’s been a go-forward strategy, not COVID-19-related. These are long-term strategies as the channel shift continues, as the service model shifts to being more targeted and personalized. We have fewer people involved in ‘traffic management’ in stores and more in clienteling.”

Metrick said the strategy was put together pre-COVID-19 and kicked off prior to the lockdown. “We went into COVID-19 with a specific long-term strategy. We have not pivoted from that at all.” He calls it “luxury disrupted,” adding, “It’s really about fashion, ease and personalization. Fashion is first, we are in the fashion business.”

Saks has been advocating “buy now, wear now” to get deliveries timed better to when the demand is there. Asked if there is any progress on that, Metrick replied, “It’s still in its infancy.” To work, widespread adoption by designers and retailers must happen.

Metrick did say the company has been selling more at full-price, a result of delayed shipments and an altered markdown cadence. “If you are more seasonably appropriate, you sell better at full-price,” Metrick said.

Saks, like other retailers, canceled or delayed orders with the outbreak of COVID-19. Consequently, “through the spring season, we actually delayed the promotional calendar by about a month, from mid-to-late May, to the July 4 weekend. That helped margins. The customers’ experience was great. People got what they wanted,” said Metrick.

Saks is planning similarly for holiday. “The full-price life of certain categories has crept up,” said Metrick. Whereas over the last 20 years there would be price breaks a week before Thanksgiving, “We are not breaking until after Christmas,” Metrick said, though the timing could change depending on when competitors, such as Neiman Marcus, Bergdorf Goodman, Nordstrom and Bloomingdale’s, unleash markdowns. It’s expected to be a very promotional holiday. He said deliveries are coming at a different pace, a bit slower, as expected, abetting full-price selling.

Recently the culture at Saks changed. “For a long time,” Metrick explained, “Saks was sort of a banner of a large operating company,” the Hudson’s Bay Co. “We had a certain level of autonomy to make sure the customer experience was differentiated. We didn’t have full operational autonomy. That can slow you down. It’s more difficult to change something or move forward.

“Now we have a much higher level of accountability across the organization and that drives better results,” Metrick added. “It creates sort of an energy that the customer can actually feel. It’s a really good thing. It’s something we kicked off a year and a half ago. There’s a very big shift in how we are running the company. There is much more autonomy,” not only for Saks, but for Saks Off 5th and Hudson’s Bay in Canada, under the banner of more decentralized Hudson’s Bay Co.

At Saks Fifth Avenue, previously, “There were a lot of dedicated resources sitting in the central office,” Metrick said. Now, for example, he has his own human resources/people organization, legal, logistics and a chief financial officer reporting to him, among other shifts. And for much of the team, the reorganization is “making them feel they own a piece of the business.”

For Richard Baker, the executive chairman and ceo of HBC, “there is much more clarity around the financial performance which helps Richard understand how each business is performing. That’s very hard to do that when everything is shared,” Metrick said.

In April 2015, Metrick, who was executive vice president and chief administrative officer of HBC, became president of Saks. He’s not considered a merchant, though he has merchandising expertise, seems tuned into the competitive landscape, and after being at the store for two decades, understands its people and culture. He’s said to be highly analytical with a deep understanding of merchandise allocation and planning processes, data mining, financial controls, business development and marketing.

In July, Metrick was promoted to ceo of Saks, while continuing as president. The change had a lot to do with Saks’ increased autonomy. “It was much more than ceremonial,” he said, of the promotion. “In some ways, it signaled to the world that I am wholly in charge of my business.”

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