In February, Saks Global said it had a master plan to “reset” the luxury experience, but offered few specifics.
What it did lay out were a new policy to start paying vendors on a 90-day schedule and intentions to make good on past-due bills in monthly installments. While the payment plan didn’t go over well, it did give brands some sense of relief that they would finally get their money and that, at least many of them, would have a future with the retailer.
Now that future is starting to come into sharper focus.
In an exclusive interview with WWD on Thursday, Saks Global chief executive officer Marc Metrick spelled out much of what’s been happening behind the scenes to make the integration of Neiman Marcus Group into Saks Global work, and “reset” the luxury experience.
That’s a tall order.
It’s been little over three months since the $2.7 billion acquisition of the Neiman Marcus Group by Saks Global was finalized, so Metrick was prepared to shed more light on his vision for the company and progress made on the integration, as well as the longer-term strategy. Around the time that Saks Global was close to completing the deal, the company came out with a new strategic vision. It’s called “The Art of You” and is intended to ground the company on efforts and initiatives largely geared toward greater luxury consumer centricity, marrying art and science, and personalization.
Metric made it clear that integrating the luxury retailers is a work in progress, and issues of the past, specifically vis-a-vis vendors, are not yet completely behind the company or fully resolved, though he also indicated that the ire stemming from months and months of delinquent payments has subsided, and that dealings with brands have been moving in a positive direction.
Marc Metrick
Efforts at “resetting” the luxury customer experience, Metrick said, center around intensifying personalization and bolstering customer service, and involve several operational aspects and integrations, such inventory sharing between Saks and Neiman’s which is currently being tested in one market, enriched data, deeper customer insights and smoother interactions with consumers, and utilizing AI to a greater degree.
Metrick did mention that further cost-cutting and staff reductions will occur, removing redundancies between Saks and Neiman’s, attaining greater efficiencies in logistics and other areas, and ultimately achieving better profitability.
Store closures will happen but Metrick sees just under 10 locations going dark. Saks in Palm Beach, Fla., is closing very soon, and some other closings could happen where Saks and Neiman’s have stores in the same center. The historic Neiman Marcus flagship in downtown Dallas was about to close for good at the end of March, but an 11th-hour arrangement was reached between Dallas city officials and Saks Global to keep the store open at least through the end of this year, as a plan for rejuvenating the store is formulated, possibly involving redeveloping the site, to keep the store operating permanently. Neiman Marcus has 36 stores; Saks Fifth Avenue operates 38, and Bergdorf Goodman operates a men’s store and a women’s store, but the company lists it as one location.
Saks Fifth Avenue in Beverly Hills.
Peter Christiansen Valli
Saks Global is seeking to reduce annual costs by approximately $500 million over the next few years.
Regarding upcoming cuts, “There’s more that’s going to happen,” Metrick acknowledged. “I admit this is a vulnerability for me. It’s the hardest part. In a large-scale transformation like this, there’s going to be continued rationalization around the redundancies of work that gets done, whether it’s legal, human resources, other things. A lot of that work has been done already.
“But there’s a lot of cost synergy and redundancies that have nothing to do with labor,” Metrick added. “That part of the project is going very, very well.”
As an example, he cited discontinuing operations at a third-party fulfillment center in Middletown, Pa., helping the company save money and add some staff to its center in Pottsville, Pa. Saks did recently close an owned center in Tennessee. Metrick declined to cite how many employees were affected there, but sources put the headcount at about 500.
Saks Global now has a single management structure with new leaders — mostly pulled from Saks Fifth Avenue while several top Neiman’s executives were let go. Some senior positions and titles the industry hasn’t seen before have been created and some fewer traditional roles have been cut. The company, with volume of approximately $10 billion, has no chief merchants.
Neiman Marcus in Fort Worth, Texas.
Before the deal, Saks stores and saks.com were re-engineered into separate companies, in part as a way to raise money, invest in more advanced technologies and talent and improve web experiences, but they’ve since been recombined. Saks Off 5th underwent the same back-and-forth.
Saks Global’s “luxury reset” is occurring in a most difficult climate for change. There is the specter of higher tariffs and rising prices on products. There’s widespread fears of a recession this year. And the luxury sector has been soft for the past year and likely to get softer as consumers squirrel away their savings and spend less on discretionary goods. Saks and Neiman Marcus both saw negative sales trends last year.
Still, Metrick expressed confidence that Saks Global will navigate through the challenges. “We’re a pretty well battle-tested team,” Metrick said, when asked if he’s concerned about the macro environment, let alone Saks’ own issues.
“In my experience, and I’ve been at Saks since 1995, I’ve seen a lot of this. You’ve got to control what you control. You’ve got to take care of your people. You’ve got to take care of your brand partners. You got to take care of your customer. We picked a really good time to have some cost synergies and to be able to strengthen our balance sheet and strengthen our business so we can withstand this. Certainly we’re expecting a little bit of turbulence for the next few months. In the back half, it may level off a bit, but we are certainly expecting it to be more challenging than originally thought.”
On tariffs, he said: “I think you’re going to see increases somewhere in the 10 percent range on luxury goods and in some areas like the contemporary zone, you might even see higher price increases coming through depending on the degree of exposure to China. But the European luxury brands, I think you’re going to see [price increases] somewhere in that 8 to 12 percent range.”
President Donald Trump hit the European Union and most of the rest of the world with tariffs of 10 percent, but it’s possible brands and designers absorb some of the costs, work with their American subsidiaries and find other ways to minimize the impact of tariffs. Those tariffs could also go higher, pressuring the system all the more.
Vendors are less on edge since Saks announced its new payment plan but are in a wait-and-see mode, hoping that Saks makes good on its promise to be forthcoming with payments on a regular basis. Many brands held back shipments, but since the payment plan was announced in mid-February, at least according to Metrick, the flow of inventory has improved. Aside from paying vendors 90 days after receipt of goods, Saks said the plan is to make good on past due payments beginning July, and in equal 12-month installments. Vendors tend to send shipments to Saks Global more or less on a monthly basis, on average.
On issues with vendors, “Nothing is behind us, but I think we are on a path towards repairing and rebuilding our credibility and relationships with our partners,” the CEO told WWD. “March, for example, is when a lot of spring goods comes in. The inventory flow is approaching 2023 levels and it’s way better than 2024. You’re starting to see it. It’s a pulse. It’s turning, and there’s momentum, though there’s a lot of work to do. We have got to rebuild trust. We’ve got to work with our brand partners. We want to grow and we’ve got to show up.”
Regarding integrations between Saks and Neiman’s, Metrick said the company is in the process of re-platforming Neiman Marcus customer data into Saks’ systems, creating “one incredibly deep and rich database.” He said Saks Global has “sophisticated models” using about 250 data points to build “customer DNA” to inform how the company interacts with the shopper, be it via email, on social media, online, and through other channels and ways.
Based on its enriched data, the Saks home page is now hyper personalized, through a project called Perso-Lab. So if you log onto saks.com, “it’s edited just for you,” Metrick said, providing information on new product arrivals, styles in your size, products and brands new to you that based on the data, you might be inclined to check out.
“Data is the most important currency in this next generation of AI and the next push,” Metrick said. “It’s not about computing power. It’s not about how many engineers you have. It’s about your data and how organized, how deep, and how well it’s architected. So as we bring in the new data, we’re enriching what we already know about the consumer and can even better inform their experience.”
Saks Global plans to replatform neimans.com and the bergdorfgoodman.com experiences onto Salesforce. “Once we do that, we can use the same architecture to make all of those experiences fully personalized,” Metrick said. That’s expected to happen over the next 18 to 24 months, he noted. Salesforce, along with Amazon, Authentic Brands Group, and G-III helped finance the Saks takeover of the Neiman Marcus Group. Saks also secured a $2.2 billion bond.
Salesforce quickly installed Agentforce last summer. It’s AI-enabled but with a bigger brain than a chatbot and with greater ability to adapt and assist customers with problems and provides answers to questions such as returns, order status and passwords. It knows customers and product policies, and learns more as it continues to take in data. As a byproduct, Agentforce helps lower the volume of shoppers making phone calls to workers at call centers.
Metrick also said the company is piloting synthetic voice, which mimics a human voice, so eventually the goal is to be able to talk to an Agentforce that isn’t human, yet they’re fully informed, Metrick said. It’s an alternative to messaging back and forth via chatbot. “We’re training this technology to understand voice inflection and word choice, so it can even understand how angry the customer is, or what mood they’re in. It’s pretty unbelievable,” Metrick said.
In Los Angeles, on Wilshire Boulevard, the company has begun sharing inventory between the Saks and Neiman’s stores, enabling associates to pull merchandise from either store, quickly. Metrick said this was a test, though he added: “The goal here is to eventually have this everywhere. This is going to be great for the brands and great for the customer. This is going to drive a lot of growth. And this is going to drive a lot of interaction with brands in the markets.”
Metrick did seem inclined to pursue the marketplace channel, for both Saks and Neiman’s. At Saks, he said, “It’s early days,” for the marketplace format. “It’s not as high of an index as you think. But it’s a model worth exploring and understanding,” Metrick said. “Neiman’s doesn’t have the technology. They don’t have the capability to do it yet. They will when we platform them onto Salesforce,” Metrick added.
Retailers based on portfolios of brands that try to cut cost and drive efficiencies have — from Gap Inc. to Limited Brands —found their merchandise or marketing starting to look too similar. Metrick seemed aware of the possible pitfall. “Homogenization is the enemy of luxury at scale, and I’ve said that before, but that’s a big one for me. We cannot let these two brands become similar.”
