Yahoo Movies Saks’ Q3 Report: Transcending Industry Trends
While e-commerce industrywide experiences a diminishing rate of sales gains this year, Saks.com is finding another path.
“It’s a little bit of a different story for Saks,” said Marc Metrick, chief executive officer of Saks, the e-commerce business for the Saks Fifth Avenue luxury brand.
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“As you think about it, we’re still seeing outsized growth online versus where we are in stores. We’re still getting the big growth online that we want,” Metrick said in an interview.
According to Metrick’s third-quarter letter to vendors, distributed Thursday, sales at Saks.com, on a gross merchandising value basis, rose 17 percent, on top of a “solid” third quarter of 2021. Results were driven by “strong traffic, customer retention and new customer growth.”
Compared to the pre-pandemic third quarter of 2019, Saks’ GMV sales in the last quarter increased 115 percent. (Saks’ gross merchandise value statistics include revenues generated through concessions and wholesale and also factor in returns.)
“I feel good about the business,” Metrick said. “Certainly times are different from last year, but our business is still growing. It’s still acquiring customers. The growth from pre-pandemic levels is important. It’s a big deal. And the increase in customers shopping both channels is big for us,” he said, referring to Saks.com and the Saks Fifth Avenue stores.
He added that “2023 is going to be another big year for Saks.”
The recent results further the company’s belief that splitting the Saks Fifth Avenue store fleet and Saks.com into separate companies, disclosed in March 2021, was the right move. Insight Partners, a venture capital and private equity firm, made a $500 million minority equity investment in the Saks e-commerce business, valuing it at $2 billion, thereby raising speculation that Hudson’s Bay Co., the owner of Saks Fifth Avenue, could take Saks.com public. HBC doesn’t comment on that possibility.
A few other retailers, such as Macy’s Inc., have considered splitting up their dot-com and store business, but determined it wouldn’t be good for them and contradictory to furthering omnichannel capabilities and integrations.
The separate Saks stores and the e-commerce businesses established scores of agreements in such areas as merchandising, marketing and management to coordinate the operations.
“Given our exclusive partnership with SFA Stores, we remain confident in the seamless experience we are able to deliver for our customers,” Metrick wrote in his letter. “Our strategy is working: the number of customers who shop both online and in store has grown by nearly 20 percent year-to-date compared to last year, reinforcing the strength of our ecosystem.”
The investment by Insight has helped fuel the digital growth by supporting initiatives in marketing, which has been the biggest beneficiary, as well as site design and navigation, personalization and adding talent.
The investment would also support customer acquisition. “Because of our brand recognition and the amount of traffic we get, our acquisition costs are actually low relatively compared to other pure plays,” Metrick noted. “We don’t have to spend as much money to generate traffic.”
Since getting the Insight investment and splitting up the dot-com and brick-and-mortar businesses, Saks.com reported that it has added two million customers, essentially doubling the number of online customers.
Third-quarter sales at Saks Fifth Avenue stores did seem more reflective of what’s occurred industrywide — a significant retail slowdown in October and into part of November. On a GMV basis, the Saks stores saw a 7 percent decline in the third quarter, versus the same period in 2021, when GMV rose by 30 percent, the company indicated. Compared to pre-pandemic levels in the third quarter of 2019, GMV increased by 15 percent.
“The Saks Fifth Avenue stores performed well last year relative to others. So this year, you’re not going to see that big bounce,” Metrick said. Top-performing Saks locations last quarter were New York, Houston and Boca Raton.
Performance of the Fifth Avenue Clubs, the personal styling and shopping service in the stores, accelerated in the third quarter of 2022, with a 10 percent increase in GMV compared to the third quarter of 2021. The Saks brick-and-mortar store company is called SFA Stores.
Combined, GMV sales at Saks.com and Saks stores was flat to last year but up 36 percent from the third quarter of 2019. Last year much Christmas shopping happened earlier, in October, due to supply shortages, panicking consumers into thinking they wouldn’t get the gifts they wanted if they waited later in the season.
Regarding current inventory levels, Metrick told WWD, “We probably have a little bit more than we should overall but it’s not big on my list of concerns.” He said it’s more of an issue in moderate and lower-priced retail sectors, rather than luxury.
He said Saks has invested a lot in technology, and has more to do. The company recently began testing a Saks-developed, machine-learning algorithm within personalized emails to make recommendations based on customers’ prior interactions across the Saks Fifth Avenue ecosystem.
“Unlike third-party algorithms that typically rely on website-captured data, we are able to factor significantly more signals into our recommendations — including in-store and post-purchase behaviors, like returns, exchanges and cancellations,” Metrick said. “Thus far, these programs are driving improved engagement, promoting product discovery and driving more frequent purchases. These ‘algos’ are very, very good. They’ve very unique. They’re very Saks-specific. And they can really drive toward the right recommendations to the consumer.”
The investment in personalization, he maintained, pays off. With it, orders per customer are up almost 15 percent and cross-category shopping is up almost 50 percent.
Asked how the holiday season was progressing, Metrick replied that from the day before Thanksgiving to Cyber Monday, “We felt good about numbers.”
Traffic on the website during that stretch was up 35 percent over last year, to 15 million visitors. While the demand was “solid,” Metrick said, “As expected, customers have been much more deliberate and disciplined in their gift shopping, as well as self-purchasing as they gear up to go out and travel in celebration of the holidays.”
In the third quarter, site traffic increased by 39 percent, Saks reported, and new customers grew by 14 percent, compared to the same period in 2021. Total customers — new and existing — who shopped at Saks.com in the third quarter of 2022 were up 28 percent compared to the third quarter of 2021.
During the third quarter, designer ready-to-wear, designer bags, designer footwear, the men’s business, statement pieces in outerwear, and generally speaking, dressed-up styles for going out, sold well.
Looking ahead, Metrick said the company is feeling good about 2023. “I certainly think it’s gonna be a much different environment than what we had in 2021 and in the first part of 2022. It’s about efficiency and being deliberate in the decision making.…There’s work to be done and there are exciting things that are going to be happening. So we’re just going to be focused, and very deliberate.”
Within the luxury sector, “There’s market share to be had and folks are going to want luxury. We just have to make sure we’re delivering the right product the right way.”
As we look to 2023, there could be some volatile times ahead and, as such, we will be even more deliberate in the business decisions and investments required to progress our strategy. While separate companies, both Saks and SFA Stores are well capitalized with liquidity available to support our business plans.”
In other highlights of the third quarter:
Saks.com and Saks stores featured the Prada holiday collection and entered the second year of its emerging designer accelerator program, The New Wave, by featuring eight new-to-Saks brands: Claude Kameni, Keeyahri, Ludovic de Saint Sernin, Nalebe, Sunni Sunni, Undra Celeste, Who Decides War and Zeynep Arcay. The program is geared to develop high-potential independent brands and amplifies diverse talent.
In November, a Saks Beauty Recycling in partnership with TerraCycle, launched so customers could turn over empty beauty containers through Saks.com and at Saks Fifth Avenue stores, to give them a second life.
