Tenor Saks

The new management team at Saks Fifth Avenue (New York) suggested it is about to spend $150 million to renovate the recently renovated first floor of its New York flagship store.

The luxury retailer recently invested an estimated $125 million in improvements that, among other things, turned the main floor of its flagship store in Manhattan into an array of high-price, big-name boutiques.

But the new management told The New York Times it now has a plan to rip out much of that renovation on an even more striking remodeling.

Fred Wilson, the new ceo, told The Times intends to overhaul the entire 63-store, $2.6 billion chain, and might even close a significant number of branches. Changes are necessary, he maintained, to bring Saks “back to its roots” as a luxury emporium, better able to compete effectively with Neiman Marcus and other rivals in the $37 billion women’s designer clothing market.

Wilson further acknowledged that he had asked the architect Frank Gehry to survey the chain’s Fifth Avenue landmark and submit ideas for head-turning changes. None of this has been officially announced yet, however.

He said the money for the flagship remodeling will come in part from increased profits. “In the first quarter, we’ve reduced the number of sales promotions by half.” The money the store made by selling at higher profit margins “will be funneled into capital improvements.”

The new management, he said in the interview, had already cleared 30 percent to 40 percent of the excess inventory, and had scattered many more mannequins, in glittering outfits, throughout the stores. “If you want women to shop every three or four days,” he said, “we’ll change the mannequins every three or four days.” Mr. Wilson said he was completing a review of Saks Fifth Avenue branches — he has visited 58 of the 63 stores so far — and will institute a three-year plan in the next two months.

Saks, competing directly with red-hot Neiman Marcus (Dallas), reported that June 2004 same-store sales increased 18.3 percent. But analysts point out that the big gains came on top of figures a year earlier so weak that it was not hard to chalk up impressive figures by comparison. They also point out that overtaking Neiman Marcus won’t be easy. Even though Saks has a greater sales volume and broader geographic reach than Neiman Marcus, Neiman’s has “a much more disciplined approach,’’ according to retail analyst and adviser Maggie Gilliam. Saks, she said, “has hung onto some locations they had no business opening in the first place,’’ adding that it “tried to be too big, too fast.’’

Plus, any attempts by Wilson to shut down unprofitable stores will involve getting out of many long-term leases, which is expensive.

Further complicating the question of Saks Fifth Avenue’s future, industry insiders said, is whether its corporate owners, Saks Inc. (Birmingham, Ala.) are thinking of selling. The corporation already tried spinning off the New York division, in July 2000, only to drop the idea seven months later, citing a decline in the luxury market. But after the May Department Store Co. (St. Louis) spent $3.2 billion to acquire the Marshall Field’s chain from Target Corp. (Minneapolis), many industry executives say this might be the right time to revive the plan. Last week, Saks Inc. coo and vice chairman Steve Sadove denied that the parent was thinking of splitting off or selling the division. “We think this is clearly a big growth opportunity for Saks Inc.,’’ he said.

Wilson acknowledged that the time for judging Saks’ viability will be the holiday shopping season. Saks recently offered an advance peek at the revamped advertising campaigns, including a new, square Saks Fifth Avenue logo; a snowflake motif and “an homage” to the late fashion photographer Helmut Newton.