Kiss deep holiday discounts goodbye, says Saks CEO

Saks Fifth Avenue in New York

By Aarthi Sivaraman

SEATTLE (Reuters) - If you are waiting for your local Saks Inc store to serve up the same deep discounts as in the 2008 holiday season -- don't hold your breath.


Last year, Saks stunned consumers with drastic holiday discounts, up to 70 percent off at times, as it struggled to sell its luxury merchandise to frugal shoppers in the recession.

But the upscale retailer, which sells designer labels like Valentino, Ralph Lauren and Marc Jacobs, has slashed its inventory by 20 percent in 2009. That puts markedly less pressure on it to discount merchandise in order to clear store shelves.

So, if consumers are waiting for last year's low prices in coming weeks, they are likely in for disappointment, Saks Chief Executive Steve Sadove said in an interview.

"You are just not going to see what you saw last fall," Sadove said.

"It's just the math. You see the inventory levels, there is just that much less product around. If they decide they want to gamble and wait to see whether it's there, they are playing roulette as to whether or not the product will be there."

That could mean anything from running out of specific sizes to the entire product line.

"That's what luxury retailing is about. It is about limited distribution (and) limited availability," Sadove said.

Having excess inventory was one of U.S. retailers' biggest headaches in the 2008 holiday season --- the worst in nearly 40 years as shoppers slashed spending and hunted for discounts in the recession.

While 2009 U.S. holiday sales are expected to decline 1 percent, that is less than last year's drop of 3.4 percent, according to the National Retail Federation.

For the second half of 2009, Saks has said it expects a mid- to high-single-digit decline in sales at stores open a least a year. But Sadove said the aim is for the decline to be smaller in the fourth quarter, which includes the holidays.

Saks is not taking any chances as it works toward that goal. Store associates are already giving customers a heads-up about limited supply, Sadove said.

"They are already saying, 'Hey, you can wait it out but there is just not as much around,'" Sadove said.

Saks has taken other steps like putting lower-priced items in stores to woo luxury shoppers who still want to own designer labels, but are not ready to fork over too much money.

"Your average price of a pair of shoes is coming down within the brands ... within a Prada, within a Gucci," Sadove said.

Saks shares were down 5 cents to $6.15 on the New York Stock Exchange.

(Editing by Gary Hill)