By MICHAEL BARBARO
New York Times
Of all the changes that unfolded at Saks Fifth Avenue under the tumultuous three-year reign of Fred Wilson, none left shoppers and investors scratching their heads more than the elimination of Real Clothes, a popular in-house clothing label.
Introduced in 1985, the line of affordable, casual apparel for women grew into a $60 million business before Mr. Wilson abruptly dropped it last year, saying the line did not fit into his vision of Saks as a luxury retailer that appealed to the young, fashion-hungry consumer.
Now, in one of the most visible efforts to reverse Mr. Wilson's course, the chief executive of Saks Inc., Stephen I. Sadove, is introducing a replacement for Real Clothes, called Saks Fifth Avenue Private Collections, set to be announced today.
The store-brand clothing lines, the first of which are to reach stores in August, offer an early glimpse into Mr. Sadove's turnaround strategy for the struggling Saks Fifth Avenue chain — a strategy that contrasts sharply with, and in some cases is directly opposed to, that of Mr. Wilson, who was ousted as the head of Saks Fifth Avenue in January.
Mr. Sadove is trying to court — some might argue placate — the loyal 35- to 55-year-old Saks customers who became alienated by Mr. Wilson's emphasis on younger, urban, skin-baring fashions.
The first of the new in-house brands, for example, features updated classics like a Victorian-inspired navy blue velvet jacket and an off-white, embroidered wool coat. The company calls it "more timeless than trendy."
Mr. Sadove is still emphasizing bold designer clothing, but he is taking a big-tent approach to fashion. In meetings, he talks about striking a balance between two kinds of shoppers — "Soho" (who crave skimpy, up-to-the-minute looks) and "Park Avenue" (who want to be on trend, but dressed in flesh-concealing clothing.)
By contrast, Mr. Wilson compared Saks to a BMW, famously telling analysts that the retailer must distinguish itself from Neiman Marcus (the "Cadillac" in this particular metaphor) by becoming the "high performance" car of luxury retailing that, like a BMW, appealed to 30-something consumers.
Under Mr. Sadove, Saks is even devising its marketing with an eye to a more traditional customer. In two weeks, when the retailer unveils its annual fall marketing campaign, tentatively titled "Want It," it is expected to emphasize popular Saks fashions with understated marketing — a stark contrast with last year's "Wild About Cashmere" theme under Mr. Wilson, which featured fake goats in the store and was mocked by fashion critics.
The marketing and merchandise shift reflects the very different personalities and backgrounds of Mr. Sadove and Mr. Wilson. Mr. Wilson, a former executive at the luxury conglomerate LVMH and the clothing label Donna Karan, came to Saks from the world of fashion.
Mr. Sadove, once head of the hair care company Clairol, a division of Procter & Gamble, arrived from the consumer goods industry.
Bud Konheim, who has worked with both men as president and chief executive of Nicole Miller, said Mr. Sadove "is much more tactical thinking" than Mr. Wilson, whose management "rested on personality rather than strategy."
Comparing the two executives' approaches, he added: "Radical is not what anybody wants right now and Steve understands this is about evolution, not revolution."
"The Saks mainstream is what they need to get back," Mr. Konheim said, "and Steve gets that."
Reached at his home in California, Mr. Wilson declined comment.
The introduction of the private collections comes as Mr. Sadove faces several challenges. Saks, which is trying to transform itself from a sprawling department store business into one focused on luxury, is searching for a buyer for its midpriced Parisian department store chain.
In addition, the company remains under investigation by the Securities and Exchange Commission, which is looking into allegations of improper accounting practices at its Saks Fifth Avenue division, relating to fees charged to its suppliers for defective or unwanted merchandise.
In all, there are to be three clothing lines within the Saks Fifth Avenue Private Collections — Signature (modern career wear, from $250 to $700), Classic (updated sportswear, with an emphasis on knits, from $178 to $1,000) and Sports (relaxed separates, including yoga wear and T-shirts, from $98 to $350).
Signature, the first of the new private-label Saks lines to reach stores, features three distinct looks — "regal Victorian," inspired by British menswear, with woolen fabrics and colors like plum and lavender; "urban sophisticate," taking its cue from the tuxedo, with poplin ruffled blouses and plaid suits, and "majestic elegance," a bit more glamorous, with embroidered taffeta skirts and silk chiffon blouses in dark blue.
Classic and Sports are to reach stores in November.
Joseph Boitano, senior vice president and general merchandise manager for women's clothing at Saks, said the new lines "have a point of view, which is very important."
Mr. Boitano said the sports collection effectively replaced Real Clothes — with higher quality and design — while the signature and classic line "are new businesses for the company."
"It's a step in the right direction," said Bill Dreher, an analyst at Deutsche Bank Securities. "When Saks moved away from the ladies who lunch and private-label it was a major mistake."
For Saks, the private collection is a return to an earlier strategy that yielded impressive results. Real Clothes built a loyal following because shoppers could not find it anywhere else and it improved Saks's profit margin because the retailer controlled the manufacturing and marketing, eliminating the fees it pays to designers like Elie Tahari and Ellen Tracy.
Building Saks's profit margin is a major priority for Mr. Sadove. In 2005, Saks's profit margin was 0.6 percent — meaning Saks made 60 cents for every $100 in sales, according to Deutsche Bank. That compared with a profit margin of 6.5 percent at Neiman Marcus and 4.96 percent at Federated Department Stores, the owner of Bloomingdale's.
In an interview shortly after he became chief executive, Mr. Sadove said Saks had not failed to match the merchandise at Neiman Marcus but, instead, had failed to contain costs. "The performance gap is productivity per store and profitability," he said.
Saks's operating income dropped to $22.3 million in 2005 from $118.8 million in 2004, with executives blaming, among other things, higher costs. But while private-label clothing is likely to improve profit margins, the open question is whether it will excite Saks shoppers.
Emanuel Weintraub, who heads a retail consulting company that bears his name, said the luxury consumer was hungry for brand-name designers — an appetite that is being amply filled, he said, by Neiman Marcus.
"When you are a luxury buyer, you expect fabulous products at fabulous prices," he said. Private-label clothing at prices ranging from $200 to $700, he said, is unlikely to meet that criteria.
Mr. Boitano said the Saks brand "has credibility to our customers" and the private collections were created with the highest-level design and quality. If a Saks shopper "is able to find a wonderful jacket with wonderful workmanship" under the Saks label, "she would love to own this."
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