Saks Fifth Avenue is Saks Inc.'s most expensive accessory. A subsidiary of Saks, Saks Fifth Avenue (SFA) operates about 45 upscale department stores in 20-plus states. The retailer is near the top of the line in fashion, selling apparel, cosmetics, jewelry, and shoes from top designers such as Burberry, Chanel, and Prada, as well as Saks' own private label merchandise. SFA's fast-growing off-price sister chain, Off 5th, caters to thriftier customers and has overtaken SFA with more than 60 locations across the US. SFA also operates a catalog and an online store and runs smaller shops in chic vacation spots. The flagship store at 611 Fifth Ave. opened in 1924 rings up about 20% of SFA's total sales.
Off 5th (launched in 2008) is Saks Fifth Avenue's outlet store format. The chain, which sells value-priced designer apparel and accessories, has been the growth vehicle for Saks in recent years as the US economy swooned. Now with the company's sales approaching pre-recession levels, and Off 5th posting same-store sales gains below that of pricier SFA in recent quarters, one wonders if the retailer has the right store mix to fully capitalize on the resurgence in luxury retail.
While all of its company-owned stores are located in the US, Saks has several licensed international stores in the Middle East (Dubai and Bahrain), and in Mexico City and Polanco. The Mexico stores are operated under an agreement with Grupo Sanborns.
Saks says: "Let's hear it for the top 1%!" While many consumers continue to pinch pennies, well-heeled shoppers at SFA stores opened their wallets in fiscal 2012 (ends January), driving sales up 8% vs. the prior year. Same-store sales increased more than 9% over the same period. The strong performance in 2012 followed a healthy gain in fiscal 2011, when both total sales and same-store sales rose by about 6% vs. the prior year. Also, net income in 2012 increased by about 56%. (The chain returned to profitability in 2011 after two unprofitable years -- 2010 and 2009 -- during the depths of the recession.) As shoppers return to paying full price for merchandise, SFA is adjusting its inventory to feature more expensive goods, such as Chanel suit and Gucci handbags.
With its US business apparently back on track, Saks is looking far beyond Fifth Avenue for growth. The company hopes to open between five and 10 locations in Japan over the next decade and has formed a strategic relationship with Roosevelt China Investments Corp. to scout sites for SFA stores in China and Macao. ASFA store is slated to open in San Juan, Puerto Rico in 2014.
Mexican billionaire Carlos Slim Helu, through Inmobiliaria Carso, owns more than 17% of the company's shares. Diego Della Valle, the founder of Italian shoemaker Tod's, holds about 14%, while Southeastern Asset Management onws about 11% of Saks.
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