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00:00Jeff, while I do want to start there, obviously this is a company that's gone through some fits
00:04and starts over the last couple of years, particularly with the relationship that it
00:07has with its vendors. Some of those vendors that cut you off last year, we're now learning that
00:12at least some of them now have agreed to return at least 140 brands. Talk to me a little bit
00:18about
00:18that. Romain, pleasure to be on with you. I am new to Saks, but I'm not new to the industry
00:25because I was a CEO of Neiman Marcus Group for seven years. Relationship with brands have always
00:30been very strong, but over the last year at Saks Global, which acquired Neiman Marcus Group a year
00:35ago, the liquidity became more challenged and pressured, and that put pressure on payment terms
00:41and on payments, and ultimately that led to less inventory and some brands in the holiday season
00:48stopping to ship or reducing significantly the shipments. And so, yes, the relationships have
00:54been damaged. And when I joined a month ago, a little bit more than a month ago, the goal is
00:59to re-establish those. And so, I'm pleased to say that today we have 380 brands that are shipping,
01:05and that accounts for 75% of the seasonal inventory that we want to have. So, they've committed 1.2
01:12billion of inventory, and that is 75% of what we expect between February and the end of April or
01:19fiscal
01:19quarter one. And then all the brands that operate in concession where it's their inventory, those are
01:24fully functioning and fully staffed with brands like Chanel having the new collection of their
01:29designer fully complete in our stores. What are the payment terms looking like right now? Are they
01:35under the traditional model, 90 days or longer, or are you still up against a 30-day repayment?
01:41So, we are, the original element payment terms is 90 days, but it differs by type of brands. And so,
01:48there is some difference there. But the brands that are shipping are shipping on the terms that
01:54were existing pre-petition, whatever the terms were for that specific brand.
01:59With regards to the level of inventory that you have, how does it compare now relative to where you
02:05were, I don't know, maybe two or three years ago before we started to see a decline?
02:10So, the level of inventory today is lower because there was a pause in receiving goods and
02:16specifically the seasonal goods. And that pause happened in December and in January. With that said,
02:23if I look at this month, which is our first month of the fiscal year, we are flat this month
02:28on inventory
02:29receipts compared to the prior year. And if I look at last week, we were up 29% to the
02:35prior year. And so,
02:36what you can see is that the brands have really moved back to ship. And they do it because we
02:43have
02:43ample liquidity with the new funding that we access of 1.7 billion of committed capital. And that gives
02:50me the confidence that the inventory is going to continue to increase and ultimately will catch up
02:56on the inventory position. What's encouraging is when we look at the demand, the demand is exceeding
03:02our inventory level, which gives me confidence that at the time when the inventory will be
03:07replenished to the extent that we intend to have it and to the extent that we bought it,
03:12then the performance will be re-gealing as well.
03:16Talk to me about actual customer foot traffic, both in-store and online. Where do we stand right
03:22now with a return to more normalized levels with regards to foot traffic?
03:28So, the foot traffic is slightly down, but not as down as the sales. What we're seeing is a
03:34conversion is lower because the consumers have not necessarily found the products that they wanted.
03:40That was very true in January. When we look at the performance in February, it is much better than
03:47it was in January. And it's improving week after week. Now, if you look at our best customers,
03:522% of our customers do about 40% of our revenue, those customers continue to spend in average per
04:00transaction more than the prior year. And those basically stayed with us the prior year. Our best
04:05seller sales associates catered to those customers were up in 25 compared to 24. So, there is a segment
04:13of customers that is very loyal and who's actually not impacted by the inventory reduction. And then
04:19there has been a slowdown on the performance. But it's really all linked to the availability of
04:26inventory, which is why it's so important for us to regain the trust from the brands. And I'm so happy
04:31that within the brands that are shipping with us, it is the brands like Chanel, the big group of LVMH,
04:37and Kering. But there's also many brands like Louboutin, Burberry, or smaller brands and smaller
04:43designers that are shipping as well. And that trust and confidence that we are rebuilding,
04:48which, frankly, is built over the many years of the trust we established at Neiman Marcus Group and
04:53the trust that existed before the liquidity challenge. That's indicating the support that
04:58the industry has and the role we play in this industry. There's been third-party data that has
05:03shown that a lot of the customers that would have walked into a Neiman Marcus or a Bergdorf or a
05:08Saks
05:08ended up going either into stores like Bloomingdale's or maybe even directly into some of the branded
05:15stores itself. Are you concerned that maybe you've lost some of those customers to your competitors
05:20for good?
05:23We haven't seen the same data. And so I don't know how accurate the data is. But if you think
05:29about the
05:30consumer, we believe that the consumer have access with us to brands that are not represented
05:36everywhere and that our sales associate have a unique skill set of outfitting and styling for what's
05:43right for the consumer. So I believe that those relationships will continue to exist. But there
05:48is a need for us to get back to inventory and to really leverage the access to funding we have
05:56to
05:56continue to do what we do best, which is serve the customers. Now, when I look at our sales associates,
06:01they continue to be performing well. And when I look at the brands, they continue to invest in special
06:07activations, special collections with us. And so the spring season is one that I believe will
06:13see a change in tide in this environment. And so that's the confidence we have in our future.
06:20Have you been able to retain your sales associates? There's been reports that Bloomingdale's and other
06:24stores have tried to poach some of your employees.
06:28There's been a couple of associates that have been poached and some of them were quite visible.
06:33When we look at the number of sales associates, and we have 1,500 sales associates who sell more
06:39than a million, and collectively they almost achieved 3 billion of revenue, we've lost a fraction of
06:46those. And the vast majority, we've retained more than 95% of those. So in terms of retaining the top
06:52talent, we feel confident. And I think what I take very seriously is to make sure that we support those
06:59teams. And the best support we can have is to provide them the inventory to sell to their clients
07:04and delight their clients.
07:05As you work through the restructuring of this company, what does the footprint end up looking
07:09like? You've already shut down most of the off-price stores. There was an announcement of a reduction
07:14of about 10% of your full-price stores. How much further do you go in this? More store closures?
07:20The goal is to create a SACS global that is profitable and sustainable. And so the first
07:26thing we've done is refocus on retail. There were a lot of activities that were real estate-driven
07:31and that didn't add value or were not profitable. And so as we refocus on real estate, we've decided
07:38to, sorry, as we focus on retail, we've decided to focus on the full price selling and luxury.
07:44And so we are winding down the SACS of fifth chain and only keep a handful of stores that
07:50are going to be there for the liquidation of the inventory that we didn't sell. But then
07:55on the full price selling, we are looking at our stores and really assessing which stores
08:00are profitable or have the potential to remain profitable for the future. And what we found
08:05is that we had presence in markets that were not commanding the size of the business that
08:11we want to do. And then we are continuing. So we made the decision to close nine stores
08:17and we continue to assess the footprint and look at markets where both brands exist. But
08:23in general, what we find is that in many markets we exist and we exist with both Neiman and SACS
08:29that are very viable, both profitable. And so we'll keep the stores that have the potential
08:34to grow and to grow profitably.
08:37Is there any discussion about a potential stake sale in Bergdorf Goodman?
08:42There's no discussion today about a stake sale of Bergdorf Goodman.
08:48Would you consider a stake sale of the operating business there?
08:51I think we'll always assess our footprint. We'll always assess our assets and make judicious decisions
08:58that are best for the company and for the shareholders. But that's going to be something we'll always do.
09:03It's not a topic of today.
09:05Jeff, I do want to ask you just also about just the identity of this company. Three brands,
09:10effectively, Neiman Marcus, SACS, and of course, Bergdorf Goodman. And I want to point out something
09:15that the executive chairman at Brunello Cuccinelli said on a conference call just last week. He was
09:21talking about the 30-year-plus partnership that he's had with your stores and the idea that he regards
09:28those brands as three distinct department stores. Those are his words. And I am curious as to what
09:35that distinction is. How does a consumer look at those three brands? Are they distinct?
09:42They are distinct. And first of all, thank you for bringing Brunello Cuccinelli in the conversation,
09:46because I think what you see is someone who's created his own brand referring to 30 years of
09:52collaboration. And so what happened in the last year is a moment in time. But the trust and the
09:58belief and the support we've received from him and many other brands is built on the many years of
10:02relationship. I agree with Brunello. We see all three brands very distinctly. When you look at
10:08Bergdorf, that's the pinnacle of luxury. It's a one location. It's an iconic location. And it is
10:14really the best of what fashion can curate. And then when you look at Neiman Marcus and
10:20Saks, they operate in distinct market where they have very strong and differentiation. Saks being
10:29very strong on the East Coast and in Florida. And Neiman Marcus having presence on the East Coast
10:33and Florida, but really being very, very strong in the middle of the country and on the West Coast.
10:38And the resonance of these brands is different within the local communities.
10:42What we want to do is to continue to amplify that difference. Saks has a heritage of New York and
10:50the fashion of New York. And we want to bring that identity to our customers. And then the Neiman Marcus
10:55is really a brand that is very close to all the local communities. And that really has a level of
11:04fashion, a level of color and a level of engagement that is very much about proximity to the customers,
11:09their communities and supporting the communities. And so we are going to express this stronger and
11:15stronger and differentiate more and more in the markets, especially in the market where both brands
11:20are existing and present for the customers.
11:23How much discussions have you had directly with some of those brands? Largely because at least here in
11:29the U.S., the Saks, Bergdorf, Neiman Marcus ecosystem was primarily the primary platform, at least multi-line
11:37platform for those brands to sell their wares. And there was a lot of hand wringing over the idea that
11:42Saks might wither away in this bankruptcy process. Are they offering you support, not just moral support,
11:49but maybe even potentially some degree of financial support?
11:52Well, the brands are providing us support by continuing to ship and continuing to do with us
11:59the activation that they did before the bankruptcy and continuing to treat us as the main partner
12:07they have in the U.S. We are the largest partner for many of those brands globally. And we are
12:12clearly
12:13for the luxury brands, the number one partner in the U.S. Their support extends to being there,
12:19being vocal with the world that they're supporting us. But most importantly, our teams are in market
12:27right now and buying for the fall. And the brands are carving out part of their collection to be
12:34exclusive to us. They're planning what we can do to a special for our customer for the fall. And I
12:40think that's the best support we can have is to align ourselves to delight the customers we have.
12:44I am curious also about smaller brands. I mean, one of the sort of, at least
12:49in the back in the old days with Saks was it wasn't just the big luxury brands that were a
12:54part of that
12:55ecosystem. It was independent, small designers that you had never heard of and probably never would
13:01have heard of if they had not shown up on the floors of Saks or Neiman Marcus or Bergdorf. Are
13:06you
13:06still working with smaller independent designers? We are. We are. And it's a very important part of the
13:13texture of our stores because our customers are looking for fashion. They're looking for fashion from
13:18established brands, but also looking for the discovery. And we call it curating the best brands
13:23and the best assortment. And so it matters today for our customers. It matters for tomorrow because
13:29if you take Brunello Cicinelli or if you take Christian Louboutin, these brands started at one of
13:34the three brands, either Neiman Sachs or Bergdorf, and then grew to be multi-billion dollar brands.
13:41And so we have a key role in the ecosystem for the brands to give them a platform to access
13:46the US
13:47customer and then from there to grow and cherish. So it is very important for us. We have some brands
13:54that are also exclusive to the group. We have a brand, Schiaparelli, that has less than 10
13:59representation globally. And about half of those are exclusive here in the US with Neiman Marcus and
14:08Bergdorf. So that is very important, both for the consumer, but for the ecosystem. And we spend a lot
14:13of time in this moment reassuring brands and supporting them that there's a bright future for
14:20them with our three banners. Can you get through this restructuring in a way where the company is not
14:27going to be saddled with the debt load that it found itself saddled with after the whole Neiman Marcus tie
14:33up a few years ago?
14:34That is the whole purpose of the restructuring. And personally, I came back five weeks ago to lead this
14:44company through the restructuring and to emerge as a profitable and sustainable business, but also one that
14:50has the rights balance sheet. Because if these businesses are profitable, Neiman Marcus and Bergdorf were
14:56profitable when we sold the business. What's important is that you generate enough cash flow that you can
15:01reinvest in the business and you can transform your business to continue to evolve and to delight the
15:07customers. So the intent from the company and the intent from the ad hoc group of creditors is to create
15:13a balance
15:13sheet that can support this business and is not saddled with debt in a way that would be not commensurate
15:20with the
15:20strength of the business.
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