04 May 2010

San Diego: Fashion Valley Saks Fifth Avenue Closing

The San Diego Union-Tribune

Come July, we’ll be Saks-less in San Diego.

Saks Inc., the luxury retail chain, is shuttering its store at Fashion Valley as it pares down underperforming locations to boost its bottom line.

“The planned closing of our San Diego store is consistent with our strategy of focusing our resources on our most productive stores,” said Steve Sadove, chief executive of Saks.

In March, Saks said it would close its store in Portland, Ore., by July as well.

The closing of Saks Fifth Avenue, which occupies about 81,000 square feet, leaves a big hole in Fashion Valley’s luxury aspirations. The mall was one of the few shopping centers in the country to house four of the most notable high-end department stores — Nordstrom, Bloomingdale’s, Neiman Marcus and Saks Fifth Avenue.

Les Morris, spokesman for Simon Property Group, which operates Fashion Valley, said Saks’ decision to leave was not unexpected. The company plans to divide the space and lease it to a number of smaller retailers, he said. While he said they’re was plenty of demand for the space, he could not yet disclose who would take it or how it would be divvied up.

He did say that Fashion Valley would continue to focus on high-end retailers that do not already have stores in the San Diego market.

“This gives us the opportunity to redeploy that space,” he said. It is not the first time that Saks Fifth Avenue, which occupied the Fashion Valley location since 1995, has closed a store in the San Diego market. In 2004, it closed its underperforming stand-alone La Jolla store.

The question is: why couldn’t Saks Fifth Avenue make it here?

The answer is simple, said George Whalin, president of Retail Management Consultants in Carlsbad.

“We just don’t dress the way people in New York, Chicago and San Francisco dress,” he said.

Whalin said too often retailers assume San Diego is like the rest of the Southern California market. But San Diegans are much more casual than our counterparts. He attributed that to the weather and the region’s top industries — tourism, defense and technology — which are not necessarily known for their emphasis on sartorial splendor.

“We just don’t dress like they do in L.A.,” he said. “We just don’t dress like they do in Orange County.”

Barbara Wyckoff, an analyst for Jesup & Lamont, wrote in a research note, that Saks’ San Diego location probably generated less than $10 million a year in revenue.

Whalin said for a store of that size to break even, it would need to pull in double, even triple, that amount.

The Fashion Valley store has about 70 employees, and the company said they will be offered a transfer or receive a severance package.

Saks has 53 Saks Fifth Avenue stores and 55 of its outlets stores called Off 5th, including one on Camino de la Reina in Mission Valley. Saks said it had no plans to close its San Diego Off 5th store. California is home to six Saks Fifth Avenue stores, with the closest locations being in Mission Viejo, Costa Mesa and Palm Desert.

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