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Jun 3, 2010
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Saks digs heels into US luxury market

By
Reuters
Published
Jun 3, 2010

Saks
Saks Fifth Avenue in New York

NEW YORK (Reuters) - Saks Inc (SKS.N) is looking more deeply into its base of wealthy U.S. customers for growth as it sees little room to expand with new stores, domestically or abroad, and expects greater demand for luxury online.

"There's substantial growth, we think, as the luxury sector continues to rebound and as we adjust the mix of the products," Saks Chief Executive Stephen Sadove told the Reuters Global Luxury Summit in New York.

Next month, Saks is closing three of its 53 full-line stores, including one in Portland, Oregon, and will continue to close unprofitable stores as needed. he said.

Sadove believes that U.S. luxury spending is on the path to recovery, despite renewed turmoil in the stock markets. But he said Saks would not turn to store expansion to fuel growth, noting that there were few potential major cities left, or centers that could offer Saks prime real estate.

"There aren't that many markets that are underserved where you'd want to add a Saks," he said. Seattle is one major market without a Saks, but that city is home to rival Nordstrom Inc (JWN.N).

While Saks licenses its name to stores in markets such as Mexico and the Middle East, Sadove said the retailer will not go into markets served by a strong incumbent. For example, in Canada, Saks would have to compete against Holt Renfrew.

LOWER PRICE POINTS HERE TO STAY

During last year's luxury spending collapse, Saks slashed prices and has offered more affordable items within the brands it carries. Sadove said that strategy is paying off and will become a fixture of its business.

"I'd be surprised if one of the lasting effects of this is if you didn't have a wide range of price points," he said. But luxury is the core of Saks, its bread and butter, and will remain so, Sadove said.

Saks is also increasing its offerings of men's apparel, Sadove said, noting that a private label men's line launched last summer is performing well.

A major prong of Saks' approach will be to open Off 5th outlets stores at a rate of about three or four per year. Sadove said the outlets, of which there are now about 55, are profitable and do not offer discounts as deep as those at Nordstrom's Rack chain.

Saks also expects its Internet business to spur sales. The retailer saw online sales jump 32 percent in the first quarter.

While luxury retailers have taken longer to embrace the Internet as a serious sales venue, many executives speaking at the Reuters Summit said they are now committed to electronic commerce to provide convenience and reach new shoppers.

"It's our second-largest store if you think about it as a store," Sadove said of Saks' online business. "It's a huge untapped opportunity for us."

(Editing by Gerald E. McCormick)

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