Saks Global's Next Act: Finance, Fashion, And Focus

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Oliver Chen:
Relentless luxury and customer centricity in this changing world of what's happening with the landscape, welcome to the Retail Visionary Podcast Series, a podcast about visionary ideas and people. My name is Oliver Chen. I'm TD Cowen's new platforms, retail and luxury analyst. In this episode, we're joined by Saks Global, one of the most important companies in luxury retail today. Iconic banners of Saks Global include Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman. The company is helping shape the next chapter of luxury retail, with a focus on strengthening its position in the high end market, sharpening its luxury customer proposition, and building for the long term.
Today, we're thrilled to have Saks Global CEO, Geoffroy van Raemdonck. Geoffroy is one of the most respected leaders in luxury retail. He's a friend and a leader, and I think of him as somebody with passion, purpose, and intention.
Prior to joining Saks Global, he was CEO of Neiman Marcus Group, and also held senior leadership roles at Louis Vuitton and Ralph Lauren, among many others. He has a rare combination of vision, discipline, and customer insight. Geoffroy, it's really fun and amazing to have you here. Thank you.
Geoffroy van Raemdonck:
Thank you, Oliver, for having me. It's great to be back.
Oliver Chen:
You've become one of the most prominent leaders in luxury and driven large scale transformations. What brought you to Saks Global? What opportunity did you see that compelled you to take on this role?
Geoffroy van Raemdonck:
Well, I came back with a passion for our business, the industry, and all the people at Saks Global. And I'm truly energized about leading this transformation, because it is truly a transformation of reestablishing the business on solid ground, and then realizing the full potential of the merger of those two groups and three banners together. At the core of the reason of coming back is a belief that multi-brand retail in luxury has a true place in the industry. And I think it starts with the customer votes for multi-brand retail proposition. When you are a customer, being able to either online or in stores, buy products that are across all categories, across all brands, and guided by someone who's going to find what's right for you, I think that's the differentiation with any other channel, especially in luxury.
And then the other element of belief is that Saks Global and its three banners have a role to play as a gateway for the brands to access the American luxury customer. And so that's what brought me here. As you know, I'm new to Saks Global, but I'm not new to the industry. I ran a business at Neiman Marcus Group that was profitable, and that grew. And what I learned there is that you really need to be focused on the key drivers of your business, and making sure that your growth is profitable and sustainable. I also learned that when you are in a financial restructuring, the key is to keep your eye on the compass. And for us, it's to get to emergence and to create value for all our stakeholders. That means our employees, the brands, the customers, and the communities in which we operate. And so I'm here to take courageous, sometime ambitious decisions, that are all geared towards a bright future where everyone benefits from it.
Oliver Chen:
That dovetails well into the next question, Geoffroy. So, what's the core narrative you're trying to establish for Saks Global today with customers and your many brand partners?
Geoffroy van Raemdonck:
First, immediate focus is that we are focused on emergence. We focus on coming back as a company that has ample liquidity and a strong balance sheet. But then when you go further than that, it's really establishing who we are, the leading American multi-brand retailer, and realizing the full potential of all three banners. You've mentioned Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodmans. These are a hundred years old each institutions that have a place in the mind of our customers, that are viewed as incredible partners by our brand partners, and operate with incredibly well-situated locations when it is source and digital properties that have been in business for more than 25 years. And so the narrative is really about a common thread. We are here because we have a history, a capability of curating the most sort after assortment. Assortment of brands and assortment within brands, and our wholesale curation of the ability to buy within a brand is really something we've built and hold over multi-years.
And then we're here because we have access, and we provide a platform to access the luxury customer in the US. When we look at our most valuable customers that account for 40% of our sales, we retain more than 90% of them year-on-year. And that is really, to me, what we need to remind the world of.
And then we recently, a little bit more than a year ago, brought two groups together. And we are realizing the integration, and the goal is to realize the full potential of those three banners together.
Oliver Chen:
On the topic of brand partners, since you joined, what progress have you made with partners and how are these relationships evolving? It's been quite dynamic, and you have many awesome brand partners and a whole variety of brand partners given your curation.
Geoffroy van Raemdonck:
Well, the word dynamic is a nice word, Oliver, because the reality, and I'll walk us back of how we got to where we are, is the reality is this company didn't have much liquidity over the last 12 months. And pressure on liquidity basically put pressure on payment. And when you delay payment at one point, brands stop shipping, and that puts pressure on your inventory, which then becomes a vicious circle of, if you don't have the product, you don't have the sales and you don't have the profitability that is generated from that. So the first thing that we've done with the brands is to rebuild the trust. Rebuild the trust, because when you don't pay, you create this uncertainty, and the trust gets eroded. Now, the best way to rebuild the trust was to access liquidity. And so we have 1.75 billion of committed capital. We've accessed 1.2 billion of liquidity, and that really is a game changer.
We are now in a position where we have ample liquidity to operate, we can buy products and commit to paying them on terms. And I think that's been a game changer for everyone. We've also established a critical vendor program, where we have the ability to pay some of our brands that are critical to our success a portion of what was owed pre-petition, and that's a program that we've put in place. And I think what I'm pleased to see is how the brands are engaging with us. And so today, we have 600 brands that are shipping inventory in the size of 1.4 billion, and that's really the inventory, 90% of the inventory that we had bought and we intended to get delivered in February, March and April. This month, depending on the week, we are anywhere between 50 to 100% more in inventory receipts compared to last year.
And so while we still are rebuilding the inventory, we still know that the level of inventory that we had last year, we are in an incredible accelerated catch-up mode. And I think what it shows is that the brands with our funding belief in our future and continue to partner with us. For me, what's really important is you need to do what you say, and that's really how we are best rebuilding the brand. Yesterday, I was so excited to see one illustration of how brands are helping us, and are investing with us. Love, which is one of the LVMH brand, did an exclusive launch in America of the new collection of their designers of their first runway. If you go to Bergdorf, you'll see that all the windows are taken over. There was a press event yesterday night, and exclusive launch of product. That to me shows that we have a place, and despite the fact that we are in a financial restructuring on our way to emergence, many brands operate as business as usual.
Now, there's more work to do. And we are working with the remaining brands that are not yet shipping, and they account for a small part about GMV, but they're important. And what's really important is that we focused on the large brands that are doing a big part of our business, but we've also focused on independent brands or emergent brands, because all curation is really about the texture of brands that are either very well known, or that are really exclusive and very special.
Oliver Chen:
That does lead into that question, Geoffroy. On the product lane, what are your thoughts about assortment curation going forward as you balance really nice exclusive products relative to breadth? And also, of course, I'm sure you're thinking about profitability and the major drivers to secure your long-term health.
Geoffroy van Raemdonck:
So you started this podcast by talking about customer. And we have a relentless devotion to the customer. And we think that one of the best thing we can do for our customers is curating the assortment. And that is really a true differentiator where we are the preferred partner for luxury brands in America. And our ability to bring to our customers what's right for them is really core to a value proposition.
Now, the focus for us is really on true luxury, but it's serving all customers. And so the offer and the curation is a blend of the most desirable, largest luxury brands that are known and drive volume for us, and have a very big following among customers. But these are equally supplemented by brands that are emerging and that are the next best thing. And frankly, those brands are important because they bring a freshness and a desirability that our customers are longing for.
We incubate those brands. And so if you go back to Brunello Cucinelli or Christian Louboutin, they were once emerging brands. They were once launched either at Neiman, Saks, or Bergdorf. And today they're billion-dollar brands, and they're among our top brands. And so it's a very important element for our customers today, but it's a very important element for long-term profitability, because that's the source of additional growth. And then we have exclusive brands, and we have many of those, Goyards, Schiaparelli, Gabriela Hearst, and many others are exclusive to us.
And you talked about profitability. And I think for me, profitability is the core of our game. We need to have a profitable business. Productivity in store or productivity of SKUs is one measure. But the other measure that I really focus on, if you go back to the devotion to the customer, is to make sure that we build a lower customer base. And so some brands may be less productive on a SKU basis, or on a square footage basis, but if they bring our best customers to come back, if they engender that loyalty, then the economics of that are incredible, because the alternative is to pay for traffic and to pick to get to know someone. And so a big part of how we measure our business and the key driver of our profitability is customer loyalty. A customer who comes back is a customer you don't need to pay a cost of acquisition. A customer who comes back is a customer that is typically less price sensitive and more content sensitive. They're looking for the best product for them. And in all those instances, it leads to a more profitable business for us.
Oliver Chen:
Yeah, it's a balance. And long-term customer value is so important as well as all these positive unintended consequences that may not be immediately apparent when you have smaller brands that are so important for driving the curation. Geoffroy, what have been your biggest surprises as you're newer to Saks Global and you've had so much leadership at Neiman Marcus? What have been your bigger surprises in coming back?
Geoffroy van Raemdonck:
I think the many surprises, and mostly positive. I think one is the resilience of the people at Saks Global. It is difficult to go through a year or sometime more of challenging liquidity and not being able to do the job you want to do and being focused on payment. And then so what I'm amazed is by the level of talent, the level of passion and a level of resilience for more teams. And this is a team that has shares a vision, shares a passion for what we are and what we can be.
And I kind of knew that, but I have been blown away and humbled by how much there's passions and resilience. And you see it in how people are all rowing together. You see it in the level of retention we've had during that year. If you look at our bestseller associates, the turnover last year was in the low single digit. I think it was two or 3%, which is what we have in a normal year, but last year was not a normal year for us. And so that's been an incredible surprise, if you want.
The other one is the support from the brands, and how the brands extended themselves to support Saks Global before financial restructuring, at a cost to themselves and how they are now very quickly supporting us. And I thought it would take us longer to rebuild that trust. And I'm really very humbled by how people rally behind our vision and our mission.
Oliver Chen:
Geoffroy, the off price sector is vibrant and big, and I love Saks at Fifth, but it's not necessarily similar to your core business. What's your vision for off price?
Geoffroy van Raemdonck:
So off price is a big market, and I believe that that market requires scale. We've made the strategic decision to focus on our core business. Historically, we focus on elements that were non-core that included real estate ventures, other types of investment, development. And it's critical for me that we focus on where we have a differentiated and competitively advantaged position. And so we've made the decision to wind down the off price channel for us. We will keep 12 of fifth stores that will be really for liquidation of inventory, and we are closing the five last core stores that remain in our fleet.
And I think that's really important, that we focus our time, effort, resources, where we will win customers, and where it really reinforces the core of our business and drives our profitability.
Oliver Chen:
That does dovetail into some harder decisions you've made on the store footprint. What's your strategy for the store footprint over time? What are some highlights and the framework you're thinking about in terms of building a long-term sustainable business?
Geoffroy van Raemdonck:
Well, we're taking advantage of the structured process in which we are that provides tools. And those tools as we can make decisions that are not easily available when you're not in a financial restructuring. And one of those set of decisions is really looking at optimizing our store footprint. I'm a strong believer that luxury happens across all channels. Customers shop online, they shop when the client, the sales associate sells them remotely, and they enjoy the physical experience in stores. So when we looked at our store network, we first had a wave of consolidation where we exited stores that were very small, and for the most part not profitable. And that was nine stores that we exited in February. They accounted for very small, low digit part of our GMV, and didn't have the economic profitable viability in the long term.
And then we went into a second assessment, which was really what is the footprint that we want among stores that at times were profitable, and we decided to focus on the market where the luxury customer is. So, markets where there's a high concentration with luxury customers. In many of those markets, at least six of them, we have a Nieman and a Saks store that are co-located, and literally in the same mall or across the street. And what we see in those markets is that there's actually a low overlap between a Saks and an Neiman customer. And in those markets where Bal Harbour, same old Boca Raton or Beverly Hills across the street, what we find is that the overlap is anywhere between 10 to 15% of customer shop both. And so there's a real reason to exist with two distinguished differentiated experiences. And so these are the markets where we doubling down. And then we looked at the other markets where one of the two brand was stronger than the other one. And in some markets, Saks or Neiman was two, three or four times the size of the other one.
And in that case, the customer has voted that there is a winner in the market and it's best for us to invest our efforts and resources in that extremely successful store. And then we looked at the other markets where we operate profitably, and it's either a Saks market or a Neiman market. And that's how we decided to keep our stores. At the end of the day, we are going to have 15 Saks stores, 33 Nieman markets, and we are going to have one Bergdorf stores. They're all going to be profitable, they're all going to be at the right level of scale. And that allows us in the future to make investment in inventory, in people, in events, and in CapEx, in highly productive locations. We happen to have some of the best real estate in the country, and we've negotiated with landlords to have contribution in CapEx, reduced rent.
And so I think our footprint is going to be very strong as we look to the future and capturing the customer in stores and outside of stores.
Oliver Chen:
Another question comes up in terms of the brand banners. What's your hypothesis or vision? I've always thought of Saks as a contemporary inclusive luxury across a wider spectrum, and Neiman Marcus being so customer laser-focused. What are your thoughts on how the banners should evolve in terms of the brands and the personalities behind the banners?
Geoffroy van Raemdonck:
Well, we start with the customer. And the customer is actually slightly different. The Saks customer is a customer who really focused on her self-expression through fashion. And it is really important for her to identify herself and express herself through an element of fashion. And she really likes and needs support in her guidance, and really loves when we introduce her, guides her in her self-expression. The Neiman Marcus customer is a customer who has luxury across many dimensions of her life, and is looking at the product categories that we offer as one of the element of living a luxury lifestyle. And then the Bergdorf customer is at the pinnacle of luxury. It's a customer who really loves fashion, but is also very involved in the art and culture. And so they all engage in the luxury world, they all engage in fashion, but from a slightly different angle.
And I think that the future, and we still need to craft that future, so this is early days, but the future is to differentiate them more and more, so that there is a better connectivity between the positioning of the brand and what the consumer wants, and that ultimately we canvas the market better, because it doesn't help us if we overlap. It helps us if each of these incredible banner stands for something that is different, and therefore as a higher chance to have customers saying, "Oh my God, you're the best place for me to go."
Oliver Chen:
So Geoffroy, turning to the future and vision, you've been an industry ambassador and leader. How has high-end customer shopping behavior changed? What do you see happening in terms of where and how luxury customers shop? On my mind also is longevity and wellness, and what that means, and what's your view of experiential.
Geoffroy van Raemdonck:
So I think there's a lot of things that have happened in our world. One is an increase of high net worth individuals who are engaging in their lifestyle and enhancing their lifestyle across multiple categories. And so we are seeing that the addressable market is growing. Those customers are looking for fashion, because they love the newness, they have a sense of fashion, and it provides them a source of joy, but they're also looking beyond fashion and products for experiences. And some of those, we don't capture if it's travel, but many of those we do capture because we provide enormous amount of experiences. And that's captured into our restaurants, into our beauty services.
And also, what we realize is customers want to engage with us in events. And so the ability for us to say we are going to host a birthday party, we are going to host a preview of products, we are going to host a dinner, we tend to be oversubscribed. And so the evolution for us has been that, at the core of what we do, we sell products, but the engagement with our customer and the longevity is really about experiences. And what we want to do is expand on the level of services and experience we provide. And we want to continue to personalize the experience, because I think customers today want to be recognized, they want an experience that is right for them. And I think technology and data allows us to scale the wide glove service. And it's very clear that some of our customers work with one sales associate, and they have an incredible experience with those, but now we should be able messaging in our interaction, in our recommendations, to personalize that experience to more people and provide that white glove service to more of our customers.
Oliver Chen:
You've been a part of my class at Columbia Business School where we talk about new frontiers of retail. And we also talk about that framework of customer lifetime value. And in that context, what are you thinking about new customers existing retention rates and LTV? What are some of the levers that you're most focused on?
Geoffroy van Raemdonck:
I think we focused on a balance of continuously recruiting new customers, because your business needs injection of new customers. We need customers of all ages. And so acquisition of customer is always going to be a key part of our business, but it's not the only one or the most important one, because ultimately what makes us special, and what makes us uniquely valuable for the brands and what drives our profitability is the ability to build a relationship with customers, and to migrate them to go to multiple purchases with us. We have really interesting statistics. If you look at a customer who shop in stores only versus a customer who shops across all channels, the omnichannel customer spends three times more than the store customer. And if you compare that omnichannel customer compared to an online channel only, they spend 10 times more. If you look at a customer who's in a relationship with one of our sales associate, and we define that as a customer who shops three times or more with the same sales associate, they spend 16 times more than a customer who's not in a relationship.
And so for us, the holy grail is to serve the customer and give them personalized journeys that are so fitted for them that they keep coming back to us, and that ultimately we can serve them better because we know them better. Today, if you look at Saks and Neiman, we do about 50 to 60% of our revenue with customers who spend at least $5,000, and we do across both channels, 40% of our revenue with customers who spend more than $10,000 with us. And those customers we retain at 90% year-on-year. And so that is the core of our business model, but we welcome all customers, because you never know who is going to be a perfect match for you, and we need to earn the trust and delight all our customers with the hope that some of them will grant us their loyalty over time.
Oliver Chen:
Another topic, you and I have had many great seminars on this at Wharton, but AI, AI and retail media, what role do you see those evolving, and the role they'll play perhaps in this context and personalization as well as monetizing additional revenue streams?
Geoffroy van Raemdonck:
So, I'll start with AI. I think AI is a game changer for industry. It's a game changer in terms of our ability to serve the customer better, and behind the scene gain efficiencies that can be reinvested in what the consumer sees and values. And I think that it's early days, but where the opportunity can be captured better is I think it really sits... AI is a CEO topic. The CEO needs to have a view of, "What is it that I want to achieve?" And then you bring AI in your team, as you bring different team members, and you look at what can AI do to accelerate and realize that vision. But I think it needs to be in the context of what you're trying to do. And so for us, we are looking at AI. How does that allow us to drive accelerated loyalty? How does that allow us to personalize the journey and delight our customer more?
It's all in the eyes of that devotion for the customer, because otherwise you can look at AI, and AI can bring efficiency everywhere, but ultimately, if it's not in the service of the customer or your strategy, it's like point solutions, but it's never going to rise and fully make a difference. So, I do believe AI has a big role to play, and the efficiencies we can get from AI can be going to the bottom line, but it can also be invested in future growth.
I think the retail media is a different topic for me. Retail media is an avenue of monetizing your database, your client base. I think in luxury, you need to be very careful, because at the end of the day, you're building a relationship of trust, and it sometime can be going in opposite to that. At the core of our business, which is not the case of all the department stores, we make money on the core of our business. We make money by buying and selling luxury products to luxury customers. We're not driving our profitability from retail media, or credit card, or non-core businesses. And that's not to say that we don't want to participate in that, but it's always going to be as a adjunct to our core business, not replacing the core profitability and the core value proposition of what we do.
Oliver Chen:
And really understanding the evolution And embracing and fostering this idea of trust is so important. On the topic of the future of retail, one topic I think a lot about is marketplaces, Geoffroy, and also marketplaces online relative to concessions and digitization of concessions perhaps. But what are your thoughts about that and the balance between taking inventory ownership and online and offline concessions?
Geoffroy van Raemdonck:
I think multiple business models can work together, and there's not one size that fits all. What's clear is that historically the concession marketplace business model has been less profitable, and Saks was less profitable than Neiman Markets Group. And I think that's one of the reasons. So, it's very important to me that, whatever we do, it has to be with an eye of profitability, because we can only be a good partner to the brands and the customers. If we are profitable, if we generate free cash flow, that we can reinvest in the business. And so that is a key element. I think, in general for us, the model that works best is the model of wholesale. And I think that's for two reasons. One is because we know our customer best, and we can curate what's right for her or for him. And so that's one element.
And the second one is by keeping the relationship with the sales associate, we can provide this unique service that is saying, "Customer, we are offering you what's right for you regardless of what brand it is." And so we truly objective in bringing and introducing brands to our customers. But that's not to say that, with some brands, some geographies, the concession model doesn't work, and actually it's proven for us to work very well in some circumstances. So, it's a case by case, always driven by what's best for the consumer and what allows us to be the profitable partner we should be an O2B.
Oliver Chen:
Yeah. And that profitability component is so important to the whole ecosystem working. On that topic, Geoffroy, what is the hardest part of being profitable? This industry is highly competitive, and retail continues to need to reinvent.
Geoffroy van Raemdonck:
I think to me the hardest part is to be true to who you are and execute on your core differentiators. And it's simple to say, because the first thing is, what am I best at? And for us, what we're best at is curation of assortment. It's a sales assisted model, it's omnichannel and integrated retail, and it is really personalizing the journey for the customer. But executing on that flawlessly and in a way that is economically optimized, it's actually hard work, because it is a complex business with multiple locations, multiple types of customers, multiple brands, multiple categories. And so to me, a big part of it is execution. And then for us specifically, it is linked to building and maintaining that customer loyalty, because our economics with the customers who come back repetitively are so much better. And when we start the year and we have a stable base that we've cultivated from the many prior years, it puts so much less pressure on your top line and P&L because you start a year with a robust base.
And so for us, the cornerstone and where we are most focused is driving customer lifetime value, because that's a huge predictive factor of our profitability.
Oliver Chen:
Thank you for that. Final question, Geoffroy. I work closely with Louis Vuitton and Caring as well as Zegna. The US market's been really robust at the high end with the K-shaped consumer. How would you characterize the health of your customer today on a scale of one to 10? And finally, as a future vision question, where do you see Saks Global headed over the next five years? What does the future look like when this transformation is complete?
Geoffroy van Raemdonck:
On the first part of your question, I think the US market has proven over the years that it's a very resilient market. And I have a firm belief that there's enormous growth for luxury in the US, and we're seeing it right now with some geopolitical instability in the rest of the world. For us, as I mentioned to you, we have a very loyal customer, and we are growing as the high net worth market is growing. If I look at last year, those customers who spend more than $10,000 a year with us, and that account for 40% of our sales, their average transaction grew. And that's in a year where our company didn't grow, and we didn't have all the inventory we wanted. So, there's a strength with that luxury customer that is very real. If I look at our personal shoppers, which is a subset of our bestselling associates, they grew last year. And again, in the context of a company that was not firing on all cylinders and was in the middle of an integration.
And so I really believe that there is growth to be had. We started with a very strong basis of customers. And those customers are served by our sales associates. If I look at our sales associates, we have 1800 sales associates who sell more than a million a year. And in average, they sell 1.8 million each, and collectively they sell 2.8 billion. And that business is really, to me, quite unique, because the relationship we have with the customer and our ability to delight the customer is powered by human. And those human know our customer, those human have a drive to serve those customers. And so I look at the consumer health as being much stronger than the business health, because we suffered last year from an inventory problem, but our customer actually stayed quite resilient despite that.
And that then leads to the future. And your question on the future for me, the merger created a unique group that has scale in serving luxury customers, and being the best gateway to get to luxury customers. The top 10 brands we have account for 30% of our business. It's almost a third of our business. They're all highly recognizable luxury brands. And for all of them, we are their largest partner in the US. And for many of them, we're the largest partner in the world. And so for me, the future is about establishing ourselves as this best destination for luxury customers, and getting the partnership of the brands to delight them. And it's going to be a customer-centric journey. Everything we'll do is for the devotion to our luxury customer, and making sure that we do the best to delight them. And in return, earn their loyalty, and that's going to fuel the journey ahead.
Oliver Chen:
Well, Geoffroy, it's such a pleasure. Focus, curation, execution, and also your steadfast commitment to what customer centricity means and running a profitable franchise where you can support the whole ecosystem. Everybody's cheering you on because it's so important that these brands and these icons and this place of ritual survives and thrives. Thanks for your time today.
Geoffroy van Raemdonck:
Thank you, Oliver.
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