Dive Brief:
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Saks Off 5th will begin closing nine stores starting in January, parent Saks Global said Thursday. The off-price retailer now runs 79.
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The move better positions the off-price business for success in the long run, a Saks Global spokesperson said by email. “As part of our ongoing and comprehensive strategy, we have taken a critical eye to our store footprint,” the spokesperson said.
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Days ago the company said Saks Off 5th President Kim Miller will take a newly created role at Saks Global. As chief customer officer, she will be leading all customer-facing channels for Saks Fifth Avenue and Neiman Marcus as well as some at Bergdorf Goodman.
Dive Insight:
Saks Global’s struggles to pay vendors and maintain inventory appear to be impacting its off-price business.
The failure or at least delays in paying their bills are likely keeping top brands away, according to Nancy Mair, president of NCM Consulting, whose 30-plus years in merchandising and off-price strategy include stints at Nordstrom Rack and Burlington.
“They're not prioritized in the market,” Mair said by phone. “The best brands are not going to sell to them and have their product on the floor. With lessening traffic, they're losing volume. Why would they put themselves out there when they want to protect their brands?”
And Saks Off 5th doesn’t seem to have a brand strategy, she said.
“It looks like they're doing what they can just to put product on the floor,” she said of the off-price retailer. “If they're not paying their bills and they can't get the best of the best, I don't think there's hope.”
The company positions the closures as advancing Saks Off 5th’s potential, however.
“We have identified opportunities to optimize our Saks Off 5TH store presence, through both initiatives to drive performance and elevate the customer experience, enabling us to place greater attention to our high-performing and high-potential store locations, and refinements across our store footprint,” the Saks Global spokesperson said.
Those refinements are happening as TJ Maxx and other off-price giants continue to expand their fleets amid ongoing strength in the off-price segment, as consumers of all income levels seek out value. This also gives brands options, making it easier to avoid Saks Off 5th, Mair said.
That includes fast-growing Nordstrom Rack. Analysts have seen Saks Global’s travails as a potential boon for Nordstrom all year, and now that seems to be playing out on the off-price side. The department store, which went private in May, ended Q4 with 277 Rack stores and plans to open 20 more this year.
Brands “love doing business with Nordstrom,” many of which are also found at full-line stores, according to Mair.
“They have direct relationships,” she said. “And, you know, anything that's discovered in Nordstrom Rack helps acquire Nordstrom customers.”
