Saks is focused on 'catching customers as they enter their luxury continuum,' CEO explains

Saks CEO Marc Metrick sits down with Yahoo Finance's Brian Sozzi at the 2023 Milken Institute Global Conference to discuss consumer trends in the luxury retail space, changes in men's fashion and workplace attire, shifts towards online shopping experiences, and the adoption of artificial intelligence.

Video Transcript

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AKIKO FUJITA: Well, the consumer is proving resilient in the face of higher prices and the threat of a recession. Earnings reports so far pointing to consumers continuing to spend on everything from snacks to candy. Travel demand is also up, and we're seeing even more strength in the luxury consumer. LVMH shares hitting a record high earlier this month after first quarter sales doubled-- yes, doubled-- analyst expectations.

For more on retail and the luxury consumer, let's head out to the Milken Conference in LA, where we've got Brian Sozzi joined by Saks CEO Marc Metrick. Brian.

BRIAN SOZZI: All right. Thanks so much. Marc, thanks for joining Yahoo Finance. And really, over the past few weeks, we've gotten some really good reads on the state of the luxury shopper. Louis Vuitton very good. Other players good as well. What are you seeing online in your stores because you run that online operation at Saks?

MARC METRICK: Yeah, first, I think the luxury consumer is kind of painted with a bit of a broad brush, so there's lots of-- it's a whole continuum. And we're seeing different things from different folks as they sit on the continuum. You have those that are sort of dipping their toe in the pool every once in a while. They buy one thing as a reward or a treat.

And then you move all the way across the continuum to those who sort of luxury courses through their life. It's how they travel. It's how they shop. It's what they wear. It's how they spend their free time. And we're seeing a different sort of behavior across that, while that core true-- tried and true luxury consumer is certainly holding up the best.

BRIAN SOZZI: How do you explain that? Is it the stock market is still doing pretty well? Why are they spending so much?

MARC METRICK: You know, I really think luxury is more than just stuff. It's not transactional. I think to that core luxury consumer, again, it's part of life. And as you see this pivot that people are making-- put the macro aside for a minute and just as people flip back into services from goods, as we emerge from the last couple of years, they're traveling.

They're going back to work. They're going out to dinner. Those all require wearing new things. And especially in the luxury world, that's where we're winning.

BRIAN SOZZI: That consumer can't show up wearing the same thing twice, I guess, right?

MARC METRICK: No way.

BRIAN SOZZI: Talk to us about-- we are now-- I'm reminded, actually, by this conference and all the people here, we are back out traveling. People are back in the office. What does the wear-to-work uniform look like?

MARC METRICK: I don't think there's a uniform. I think that's the good thing about fashion. I think what's happened is, especially with men over the last couple of years, even pre-pandemic, you saw people trying to become much more individual, no more uniform. So you're certainly seeing people getting more tailored and more dressed up again than even last year, which is good. But you're the first tie I've seen in a hell of a long time.

BRIAN SOZZI: No, I'll take this off. Snip, snip, snip. Well, I mean, are you not selling men's ties? Is that out? I mean, is that look-- am I-- what I'm wearing, is it completely out of date?

MARC METRICK: No, I think--

BRIAN SOZZI: You can tell me. It's fine.

MARC METRICK: No, I think to be honest with you, that's the difference now with fashion, especially with men, it's whatever you want. It's however you want to express your fashion and your style, which women have had for a long time. But us guys, it's new for us. So if that's how you feel, great, and that's how you feel comfortable, we have it. It's available. I just see less of it.

BRIAN SOZZI: Well played, sir. So in terms of women's fashion, what's going on in there? What are they buying? What are they not buying? And more importantly, what are some of the top brands that are selling?

MARC METRICK: Yeah, I think it's really what are they buying. It's this move again. You're seeing a lot more getting dressed again. So you're seeing women wearing blazers again and getting dressed again. And I'm not saying that in the way of sweatpants during the pandemic.

I'm talking even just it's certainly much cleaner of how people are getting together. You're seeing fewer sneakers. I'm not saying they're all the way back into, like, a high heel, but it's certainly a more comfortable shoe. So you're seeing that espadrille or the flats. So women are certainly inching their way into a different place than where they were.

As far as brands, look, it's a full spectrum. And it's about, again, what's important. What we're seeing less of are brand logos on the product. I think it's a lot more quiet, so to speak, from what people are wearing right now.

BRIAN SOZZI: Who's the core Saks shopper? Is there an age demographic that is essentially driving your business right now?

MARC METRICK: Look, I think, again, it's that whole continuum. And at Saks, we're very focused on the lifetime value of a consumer. So just like most on the luxury side, we'll index fairly high with a concentrated number of customers. But our focus really is on catching customers as they enter their luxury continuum and try to ride them up as they go.

BRIAN SOZZI: A couple of years ago, you split from your stores. Now, I remember covering that, and there was-- there was a wow-- it was a wow moment in retail because nobody that I know of was splitting up the store business from the online business. You run that online business. What has life been like after doing that?

MARC METRICK: Look, I think it's been great. You know, I have to tell you, it's a sense of pride to answer a lot of the skepticism with one, how the businesses are performing. We don't report it or think about it together. But, you know, I'll share with you, as an ecosystem, which is what we call the combination of my online business with our partners at the SFA stores, that's up over 40% versus 2019.

BRIAN SOZZI: Your overall sales this year?

MARC METRICK: In '22.

BRIAN SOZZI: '22.

MARC METRICK: Fiscal '22 for that period of time up against 2019. And 2019 was a high watermark for the business. We were up on a three or four-year run going in. So it's working from that respect. But it's more about the consumer and what kind of deep connections we can form with that consumer.

And if you look at it, actually, we have 40% increase in our consumers that shop both channels from 2019. And that's not some kind of fake burst from the pandemic because even this year we're up 5% versus last year. And that's customer shopping both channels, which in luxury was a little bit slower to take off. So I feel like it's a win-win, and it's working as planned.

BRIAN SOZZI: Is it Saks specific? Why don't I see anybody else doing this in retail?

MARC METRICK: Look, I think everyone's got to do something first, and we were there. And we have a very, very loyal customer base. We have a fantastic name with great recognition. With 90% brand recognition, it was easy and very effective for us to launch as a pure play into the marketing world. So it makes it easier.

And the partnership with SFA stores allows us to really execute on that omnichannel promise. We have 40 stores. It's not like we have 900. We have high average order values. So the unit economics that we're doing business with are much more effective to do something like this with, whereas it's just not going to be as easy for everybody.

BRIAN SOZZI: So if you're not out there signing off on new stores in terms of the website and the operations itself, what are you focused on this year?

MARC METRICK: We're focused on the customer experience. And when I say that, it's not just about shipping. It's not just about-- it's about how deep we know them. It's about personalization. It's about mining the data that we, quite frankly, have always had but haven't done it as effectively as we can do it now.

I think the future for us, obviously powered by technology, the advancements we've been able to make, the investments we've been able to make, all of that is going to inform much better decision making both on our marketing tactics and how well we know our consumer and what kind of deep connections we can have with them.

BRIAN SOZZI: Does AI play a role in your business at all right now?

MARC METRICK: You know, of course. Right now, the focus, a lot of it is on efficiency in the back of house and what we're using it for. But we use forms of machine learning and intelligence on our site, whether it's recommendation engines that we have. 95% of our email communication is personalized, and that's done through AI. So there's work being done. It's early days. But certainly, I feel very good about the progress we're making.

BRIAN SOZZI: Before I let you go, real quick, is your company public--

MARC METRICK: No.

BRIAN SOZZI: --within a year or two? Do you have any ambition to go public?

MARC METRICK: Right now, the ambition is to make this the best customer experience we can.

BRIAN SOZZI: All right. Well, good luck to you in that journey. Saks CEO Marc Metrick. Good to see you. Enjoy the rest of the conference.

MARC METRICK: Thanks so much.

BRIAN SOZZI: Appreciate it. Guys, back to you.

AKIKO FUJITA: All right, Brian Sozzi there joining us from the Milken Conference, along with the Saks CEO Marc Metrick.