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Designing Value at OFF 5TH

BY Marianne Wilson

Similar to most retailers, Saks Inc. has been hit hard by the slowdown in consumer spending. But the company remains firmly committed to the growth of its Saks Fifth Avenue OFF 5TH division, whose value message strikes a resonant chord in today’s environment. The brand is also profiting from a repositioning in 2007 whereby it broadened its merchandise selection to include direct-from-vendor product and more of its private label along with clearance merchandise.

With 50 units nationwide, OFF 5TH recently announced plans to open in The Promenade at Camarillo Premium Outlets, Camarillo, Calif., and Tanger Outlet Center, Mebane, N.C. The two locations join the company’s previously announced 2009 openings: The Rim, San Antonio; The Legends in Sparks Marina, near Reno in Sparks, Nev.; and Cincinnati Premium Outlets, Monroe, Ohio.

All new OFF 5TH stores are being designed after the company’s new prototype, which premiered in spring 2008, in Prime Outlets International Center, Orlando, Fla. Designed in partnership with Grid 2 International, New York City, the streamlined design has a contemporary feel.

The overall look is bright and uncluttered, with no hard aisles and one consistent hard-surface floor throughout. All fixtures are on casters ensuring maximum flexibility.

“The store is very modern, open and innovative, and is the perfect venue to showcase our wonderful merchandise selection,” said Robert Wallstrom, president, Saks Fifth Avenue OFF 5TH, and group senior VP, Saks Fifth Avenue, New York City.

Wallstrom was appointed to his current position in 2007. He joined Saks in 1995 as assistant general manager in the Beverly Hills store, and worked his way up through the corporate ranks. In 2002, Wallstrom was named senior VP and general manager of the Saks flagship in Manhattan.

Chain Store Age editor Marianne Wilson spoke with Wallstrom about the OFF 5TH brand and its new prototype.

How is the economic slowdown impacting your business? 

We do not separately disclose OFF 5TH’s sales numbers or operating performance. However, our customers shop at OFF 5TH in good economic times because they enjoy shopping with us, and they also shop with us when the economy is tough because value becomes even more paramount and we are able to deliver quality merchandise at value prices.

How about the category in general—do stores such as yours and outlet centers have an edge is this type of environment? 

Our stores attract a department store shopper who aspires to even more exclusive labels and brands. And in these economic times, shoppers are more value-driven than ever and will turn to outlets and OFF 5TH specifically to get more for their dollar.

What are your strategies for getting customers in the stores? 

We are continuing to increase the range of designer names and unique merchandise offerings at great values. We also leverage our fashion knowledge from our full-line stores, to create a high-quality assortment that addresses the key fashion looks of the season at a great price. Additionally, we continue to upgrade our service and store environment with the aim of creating a friendly, fun and easy shopping experience for our customers.

Let’s talk about the prototype. How did it come about? 

As we were beginning our expansion, we wanted to develop a new store environment that more fully embodied our brand. Our focus was to bring our mission—Saks Style. Outlet Prices—to life. The goal was to build a store that offered more Saks style while maintaining great value. Our new prototype focuses on enhancing three key elements: brand, service and merchandise assortments.

What do you see as the most important features of the new design and how does it compare to your previous one? 

Our new store environment is designed to create a luxury loft experience, while our previous store environment was reflective of a traditional department store.

The environment has been modernized and simplified. The new design maximizes efficiency and flexibility, enabling easy changes in the general layout as our business needs change. Our stores have a number of structural enhancements, including open floor plans, moveable fixtures, brighter lighting, enhanced visual presentations, upgraded fitting rooms and improved checkout areas. Together, they serve to create a more comfortable, easier shopping environment for our customers.

Will the new prototype be incorporated into your existing locations? 

Many of the visual and branding elements are being rolled out to our existing locations, including the logo, signing and merchandising standards. Additionally, we are beginning to upgrade our service standards throughout the company. We are also taking the key elements of our new product assortments and implementing them throughout the company.

Are you pleased with customer reaction to the new prototype so far? 

Absolutely. Our customer response has been extremely positive. Our productivity in our new stores is significantly above the company’s average. We are excited to be rolling out the new design to more markets going forward.

What do you see as Saks OFF 5TH’s biggest challenges? 

Our biggest challenges going forward are to continue to find great locations and new designer brands.

Do you think customers have higher expectations regarding off-price stores than they did a few years ago? How is Saks OFF 5TH responding? 

I agree that outlet centers have become more upscale and have begun to move away from the old cluttered clearance-center model. That was a key factor in our decision to build a new prototype as we began our new expansion.

We continue to differentiate ourselves from other outlet stores with our unparalleled offering of designer brands, our unique Saks Fifth Avenue brands and our emphasis on customer service. We provide luxury, high-quality, fashionable product at a great value. Our customers have favorably responded to this change.

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Dillard’s 3Q loss widens

BY CSA STAFF

LITTLE ROCK, Ark. Dillard’s reported a third quarter net loss of $56 million, or 76 cents per share, compared to a net loss of $11.3 million, or 15 cents per share, for the same period last year.

Dillard’s ceo, William Dillard, II, stated, “The oppressive economic environment clearly weighed heavily on our results during the third quarter. We continue to take aggressive action to navigate these challenging times. We announced the closure of 21 under-performing stores during 2008, dramatically reduced capital spending for 2008 and 2009 and are executing appropriate operating expense reduction measures throughout the Company. These efforts are not only designed to position ourselves to weather near-term economic uncertainty but also to position Dillard’s well for the long term.”

Net sales for the quarter were $1.508 billion compared to net sales of $1.633 billion last year. Sales in comparable stores declined 9%.

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Fred’s sees 3Q income growth

BY CSA STAFF

MEMPHIS, Tenn. Fred’s reported net income of $6.1 million, or 15 cents per diluted share for the third quarter 2008, an increase of 32% from net income of $4.6 million or 12 cents per diluted share in the year-earlier quarter.

Fred’s total sales for the third quarter of fiscal 2008 were $418.0 million compared with $419.9 million for the same period last year, with the year-over-year decline of 0.4% reflecting the company’s store-closing program. Excluding stores closed in 2008, total sales from ongoing stores increased 4% over the third quarter of last year. On a comparable-store basis, third quarter sales increased 1.4% versus 1.1% in the year-earlier period.

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