Dive Brief:
-
Most Saks Off 5th and all Last Call stores – the off-price retailers affiliated with Saks Fifth Avenue and Neiman Marcus – are closing permanently, parent company Saks Global announced Thursday.
-
Saks Off 5th will keep 12 stores open and shutter the remaining 57; all five Last Call locations will close. Saks Off 5th also shut down nine stores in November.
-
Saks Off 5th’s e-commerce, which split off from its brick-and-mortar business five years ago, is liquidating, according to Chapter 11 filings. An online closing sale begins Friday. Parent company Saks Global filed for bankruptcy Jan. 14.
Dive Insight:
Saks Global’s retreat from off-price is a bet on luxury, which the company last month — even as it contemplated bankruptcy — said remains a strong market. Newly arrived CEO Geoffroy van Raemdonck echoed that in a statement Thursday.
"As we advance on Saks Global's transformation, we are taking decisive steps to realign our business to better serve our luxury customers and drive full-price selling across our core luxury businesses," he said. "With these actions, we will be well positioned to seize the greatest opportunities for long-term growth and value creation.”
It’s difficult for a department store to successfully run an off-price business without undermining its full-price sales, so execution takes skill, according to GlobalData Managing Director Neil Saunders. There are advantages: The off-price market is growing while department stores are shrinking, and off-price stores can help full-line stores offload excess inventory, he said.
That is exactly how Saks Global will use Saks Off 5th stores going forward. They will sell leftover inventory from Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, and Saks Global will no longer buy merchandise specifically for them.
Six of the remaining Saks Off 5th locations are in Florida, two in New York, and one each in California, Georgia, New Jersey and Texas. Simon Property Group is asking the bankruptcy court to honor a lease termination for one of those locations, at Woodbury Common Premium Outlets in Central Valley, New York, due to unpaid rent, per court documents.
Shrinking the business to that limited role may sharpen not just the focus at Saks Global but also the opportunity for Nordstrom. The rival department store has made the opposite bet, expanding its off-price Rack operation — its biggest driver of customer acquisition — to drive growth. Along with Bloomingdale’s, Nordstrom’s full-line and Rack stores together have taken market share from Saks Global’s retailers for the past several months.
Tom Ott, a longtime merchant at Saks Fifth Avenue who later served as Saks Off 5th’s chief merchant, said it’s understandable that Saks Global may want to focus on other aspects of the business. But there is a trade-off.
Saks Off 5th “is another kind of retailing. I respect their decision if they don’t have the knowledge or bandwidth to operate it,” he said by private message. “The volume potential is enormous. Luxury off-price is the biggest void in the market today and, for the right entrepreneur, a gold mine.”
