Saks to Shutter 11 Stores, Including 5 in California
Saks Inc. said Friday that it would close 11 stores -- including five Saks Fifth Avenue locations in California -- in an effort to boost profit.
In Southern California, where Nordstrom Inc. dominates the upscale department store scene, Saks will shut stores in Pasadena, Palos Verdes, Mission Viejo and La Jolla. The Saks in Carmel, which occupies two buildings in the Carmel Plaza shopping center, also will close.
Outside California, the retailer will close three Saks stores and three of its Off 5th outlets, one of which will be reopened as a Saks Fifth Avenue.
About 700 workers, including 370 in California, will either lose jobs or be transferred to other stores, the company said. The stores in Pasadena, La Jolla and Carmel are scheduled to close in January, the company said. The timing of the closures of the Palos Verdes and Mission Viejo stores hasn’t been decided.
The announcement follows a review by a new management team to determine which of the company’s stores were unprofitable or didn’t fit the company image, said spokeswoman Julia Bentley.
“The stores remaining are very profitable and very representative of the Saks Fifth Avenue image,” Bentley said. “The stores we’re closing are some of our smaller stores.”
The targeted stores, which generate about $90 million in annual sales, represent less than 4% of Saks’ revenue, the company said.
After the closures, Birmingham, Ala.-based Saks still will have six namesake stores in California, including high-profile locations in Beverly Hills and San Francisco. Stores also will continue operating at South Coast Plaza in Costa Mesa and in Palm Desert, San Diego and Santa Barbara.
Overall, luxury department stores have been faring well over the last year. At Dallas-based Neiman Marcus Group Inc., sales at stores open for at least one year -- a key performance measure -- increased an average of 17% through August, while Nordstrom and Saks have logged gains of 10.2% and 7.7%, respectively.
“That category in general has just been strong,” said Patrice Duker, with the International Council of Shopping Centers in New York.
However, fashion and retail experts say Saks has struggled to maintain its cachet in the Southland as it has battled with an army of retailers competing for the attention of well-heeled consumers.
“It’s a tough market out here,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.
“This is sort of Nordstrom territory. And then Neiman [Marcus] is here; Bloomingdale’s is here. And then you have all the smaller specialty stores which Southern California crawls with.”
Saks earnings, which hit a five-year peak of almost $190 million in 2000, have fluctuated in recent years. Last year, the company logged profit of nearly $83 million, more than tripling the previous year’s earnings.
In this year’s fiscal second quarter ended July 31, the company reported a net loss of 20 cents a share, compared with a loss of 18 cents a year earlier.
As of Friday, Saks operated 64 Saks Fifth Avenue stores and 54 Off 5th stores. The company also operates 239 stores under a variety of brand names in its Saks Department Store Group, as well as 31 Club Libby Lu specialty stores.
As a result of the store closures, Saks said it would record a pretax charge of about $35 million in its current fiscal year. Additional pretax charges, currently estimated at $25 million to $35 million, are anticipated in the future, mostly in 2005.
“These actions will permit our team to focus capital, inventory and other resources on our most productive units and will further strengthen our brand,” said Fred Wilson, chief executive of Saks Fifth Avenue Enterprises.
Saks’ shares, down 18% this year, closed Friday at $12.26, up 21 cents, on the New York Stock Exchange.
