According to Saks Global, they have made the decision to close the majority of their off-price locations. As a result, the majority of the Saks Off 5th stores and all of the Last Call stores will be permanently closed.
Out of 69 Saks Off 5th stores, 12 will remain open and 57 will be closing. All five of the Last Call stores will also be closing. This comes after the closure of nine of the Saks Off 5th stores last November.
E-Commerce Business to Shut Down
Saks Off 5th’s online business is shutting down. The eCommerce division was separated from the brick & mortar stores five years ago and is now being liquidated. An online liquidation sale started recently. Saks Global recently filed for Chapter 11 bankruptcy, and this has greatly accelerated the decision-making process for these particular stores.
Focus Shifts Back to Luxury
According to Saks Global, the move is a step toward fully committing to the luxury retail segment, further solidifying their belief in the viability of the luxury retail segment despite other retail challenges throughout the industry. “As we focus on luxury retailers, we believe we can grow with our business and our high-end customers while also promoting more full-price sales of our core brands: Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman.” He added, “With this emphasis, we are looking to sustain our growth for many years into the future.”
Why Off-Price Is Hard to Manage
According to retail specialists, it is challenging to have both a full-price and an off-price business. With proper management, off-price outlets do not negatively impact full-price sales, but with off-price outlets growing and traditional department stores shrinking, off-price retailers need to establish separate strategies and excellent execution to help them sell off excess inventory.
New Role for Remaining Stores
The other Saks Off Fifth locations will play an increasingly smaller role going forward. Rather than purchase brand new items specifically for an off-price environment, they will sell excess inventory from Saks Global’s portfolio of luxury brands. Most of the locations that remain open now are concentrated in Florida, with dispersed locations in New York, California, Georgia, New Jersey, and Texas. One of the New York stores is experiencing leasing issues due to lack of rent payments.
What This Means for Competitors
Nordstrom may gain customers by expanding its off-price Rack stores, which can help with this retreat. Retail armchair experts believe that there is a tremendous amount of opportunity for luxury off-price; however, the only way to take advantage of that opportunity is for companies to commit to having a complete off-price division.