THE ANNOTICO REPORT

As Fiat boss Sergio Marchionne prepares to turn around American icon Chrysler, another American Icon Saks Fifth Ave, looks set to get an Italian makeover, by Italian fashion emperor Diego Della Valle, chairman of Tod's, the luxury shoemaker responsible for the famous "gommino," or driving shoe. 

A Renaissance For Saks

Forbes Magazine
By Lionel Laurent
May 19, 2009 
LONDON - 

As Fiat boss Sergio Marchionne prepares to turn around American icon Chrysler, another American brand looks set to get an Italian makeover: Saks. 

The unprofitable, upmarket department-store chain is in need of a facelift after a year of price-slashing and mounting losses, and the new look is expected to come from Italian fashion emperor Diego Della Valle. Della Valle is chairman of Tod's, the luxury shoemaker responsible for the famous "gommino," or driving shoe, and earlier this month he raised his stake in Saks to 5.9%. He reportedly has options to hike it to 10%, and is expected to unveil a relaunch plan for Saks soon in New York.

A spokeswoman for Tod's would not say exactly when Della Valle was due to appear in the U.S., but said he would be in Asia over the next couple of days. Della Valle was unavailable for comment Tuesday. He was, however, cited in Italian daily Il Sole 24 Ore as saying that he would present his plan to Saks' biggest shareholder--billionaire Carlos Slim Helu, with 18%--as soon as management backed it.

So what kind of strategy might we expect from Della Valle? It is likely to be a more designer-friendly approach than the one pursued by current management, which has seen heavy discounting on luxury goods to shift inventories and reel in hard-pressed American consumers. Tod's is not heavily exposed to the U.S. market, which accounts for some 5% of sales, but the company will likely want to protect its own-branded stores in the face of tumbling revenues.

"Della Valle has put a lot of effort into developing the retail network and coverage through his own directly operated stores, to increase penetration in the U.S., where orders are particularly weak," said Chiara Rotelli, an analyst with Mediobanca.

All this attention has pushed shares of Saks up 51.8% since Monday, to $5.07, with pressure also coming from 1.5%-shareholder P. Schoenfeld Asset Management. The hedge fund's chief executive, Peter Schoenfeld, told Reuters he was agitating for a shake-up of governance at board level to increase accountability and spur directors into better leadership.

Saks on Tuesday reported a quarterly net loss of $5.1 million, or 4 cents per share, which was better than expectations of a loss closer to 26 cents per share.

The Associated Press contributed to this article.

http://www.forbes.com/2009/05/19/tods-valle-saks-face-markets-retail.html
 
 

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