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Sadove: Starting to See Some of The Higher-End Price Points Coming Back

Tuesday, 7 Dec 2010 | 9:58 AM ET

The holiday shopping season seems to be ringing in stronger this year. Although not the at pre-recession levels, consumers are opening their wallets a little bit more and November retail sales showed that strength.

Now the question is—will the consumer carry that momentum throughout the whole holiday shopping season? To get further color on luxury side of the industry I spoke with Steve Sadove, Chairman and CEO of Saks .


LL: How would you characterize this holiday shopping season?

SS: We are well into the season. You saw the numbers that came out for the month of November and across the board, it looked like a very solid start to the (holiday) shopping season. The luxury sector I think you saw good solid numbers in terms of growth through the month of November. Its indicating the higher income consumers are feeling better about the economy, themselves, the stock market and that is being seen in the solid growth numbers.

LL: Last week I spoke with Bill Taubman of Taubman Centers about the strength of November being carried over to December. Do you think it will?

SS: Its hard to judge month by month. We projected for us mid-single digit type of growth for the quarter. So we are already one month into the quarter with mid-single digits so our expectation is that it will hold through the quarter.

Steve Sadove
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Steve Sadove

LL: What are you seeing in the accessible luxury category?

SS: First I'm seeing the core customer responding in what are we seeing in the loyalty program and that customer is coming back. That's the first point I'd like to make. From the accessible luxury I think you're seeing some signs of life there but its not a pre-recession levels. The luxury business in the U.S. overall is not back at pre-recession levels and a lot of that was driven by accessible luxury consumers who fell out of the marketplace. You are seeing a recovery but I don't think we (the industry) are fully back to where we were before.

LL: How is the strength of the online side of the business?

SS: You are seeing very upside growth on the e-commerce side of the business. If I look at our numbers that we reported, which would be the first nine months of the year, we're talking 25-percent type growth. So you're continuing to see very vibrant performance there and its growth in new customers coming in as well as an expansion in categories. I see a very, very good response to the e-commerce. You are also seeing interaction between the e-commerce and the stores in terms of the marketing that goes on the e-commerce and its having a positive effect on the stores as well.

LL: How are sales between the international tourists and domestic consumer?

SS: I think we're seeing strength from both sides. The international tourist I think is relatively stable. I don't think the levels we are at now at the $1.30 range is dramatically affecting tourism. This is not the same as 2007 when the Euro was $1.55 and you saw people coming in with the empty suitcases and just loading up product, I don't see it as that kind of environment. I'm seeing the core strength is in the domestic customer right now.

LL: How are the Saks Off Fifth Stores?

SS: The outlets are performing solidly. In the first part of the year I think you saw a slow down. The outlets never got hurt as badly as the regular luxury stores in the recession. So they didn't go down as much and they're not coming back as quickly. They are just less volatile. In the beginning of the year, and you can look at the other outlets as a surrogate since we don't report segment outlets store comps—but if you look at The Rack you saw them slow down earlier in the year and you are starting to see them stabilize. We are seeing stable performance. We feel very good about the outlets in terms of the long-term opportunity there.

LL: There is some talk about the "tie indicator" this year. How is male consumer?

SS: The male consumer is coming back. They have been shopping for themselves. We're seeing some good trends in tailored clothing, men's accessories but I don't see it outsized relative to some of the women's performance consumer where you are seeing some real good growth is in areas like women's shoes, handbags and accessories more so than you are seeing in mens. I think you are seeing some solid performance in mens. The men's businesses has come back.

LL: Is the luxury consumer trading up within brand or buy more in terms of product?

SS: You are starting to see some shifting. It was clear during the recession consumers loved their brands and were not trading down brands. They were staying within the brands, but buying more of the entry level price points within that brand. As we've now evolved, we are starting seeing more strength in the higher price points. Some of the best price points, special items within the brands, whether it was the "it" bags or shoes, or some of the fine jewelry it is starting to improve. So you are starting to see some of the higher-end price points coming back now as we have evolved through the recession.

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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."

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