Fashion Fallout. Saks Shifts Gears Back Into High End. Second City Style Fashion Blog

Image, fashion labels get makeover as chain sheds midlevel stores

Associated Press, September 15, 2006 Chicago Tribune

NEW YORK — After struggling with the wrong fashion formula that skewed too young, Saks Fifth Avenue wants to reclaim its status among the well-heeled with a makeover.

The chain’s new management is rebuilding its store-label fashions, investing in classic brands and better tailoring its stores to meet specific markets. The shift is reflected in a new fall ad campaign that embraces a broader approach to fashion, highlighting more than 20 different must-haves, from fur-trimmed coats for women to rugged sport boots for men.

Saks made a mistake of chasing young customers with tight clothing, turning off its loyal older customers. The 1998 merger with a midlevel department store operator also proved to be the wrong fit, resulting in disappointing earnings.

Having focused too much on its Fifth Avenue flagship, Saks now is renovating its regional outposts to feature open cosmetic counters and more exciting fashion displays. Saks’ Atlanta store, renovated last year, is serving as a model.

"This is step one in a multistep process," said Ron Frasch, vice chairman and chief merchant at Saks Fifth Avenue Enterprises. "But we are beginning to see the light at the end of the tunnel. You will see a good fall, and it will continue through next year."

Frasch now reports directly to Steve Sadove, chief executive of parent company Saks Inc. The new management structure has been streamlined in recent months as Saks shed its midlevel department store chains to focus on its luxury business.

Most recently, Andrew Jennings resigned as president and chief operating officer of Saks Fifth Avenue Enterprises, which consists of 54 Saks Fifth Avenue Stores, 50 Off 5th stores and

Sadove, formerly vice chairman and chief operating officer, took on his current role in a management shakeup in January that replaced Brad Martin, Saks’ longtime CEO. Fred Wilson, who was chairman and CEO of Saks Fifth Avenue Enterprises for three years, resigned after his position was eliminated.

Saks executives say a cultural change is sweeping the company, with buyers taking bigger risks on fashion, instead of playing it safe and fixating on inventory control.

Still, Saks Fifth Avenue faces heavy competition at the upper end from Neiman Marcus Inc., whose name is synonymous with luxury shopping, and at the lower luxury tier from Nordstrom Inc. "Saks is facing a competitive situation where both Neiman and Nordstrom are doing extremely well," said Michael Appel, managing director of Quest Turnaround Advisors LLC. "The issue is how successful will [Saks] be in executing from a merchandising and service standpoint."

The overhaul at Saks comes after a bumpy road punctuated by a failed merger in 1998 and an accounting scandal that cast a cloud over its business last year.

In March, Saks sold its Northern Department Store Group business, which included Carson Pirie Scott stores, to Bon Ton Stores Inc.

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