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It’s a Small World: Saks Fifth Avenue Plans International Push

Through a network of licensing deals signed with overseas companies, Saks Fifth Avenue plans to open a slew of stores in the Mideast and Japan.

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NEW YORK — Saks Fifth Avenue is going global.

The retailer’s parent, Saks Inc., will today announce that, through a network of licensing arrangements signed with overseas companies, Saks plans to open a total of four stores in the United Arab Emirates, Qatar, Kuwait and Bahrain, beginning in 2004, and between five and 10 Saks stores in major cities in Japan, beginning in 2005.

In addition, Saks is considering additional sites in Bahrain and Beirut in 2005 or 2006. South America also could be fertile ground, considering Saks has so many Latin customers, but there are no definite sites in mind.

This is the first real push by Saks to capitalize on its brand recognition worldwide, after decades of indecision over international expansion. It’s also the first international expansion by an upscale U.S. department store, though Barneys New York has two licensed stores in Japan and is planning a third for next year.

“Clearly there is a great opportunity overseas,” said R. Brad Martin, chairman and chief executive officer of Saks Inc., in an exclusive interview. Asked to project an ultimate store count abroad, Martin said, “It’s too early to say.”

Toshihiro Hirosaki, ceo of Ask Planning Center, one of the investors in the Saks’ expansion in Japan, characterized the strategy as “a new business model in the Japanese retail industry.” APC is a public company on the JASDAQ market specializing in environmental and space consulting, including planning for new shopping centers and consulting for Japanese retailers and distributors.

Considering the instability in the Middle East, Japan’s soft economy and concerns about airline security, international expansion is currently a risky proposition. But the licensing agreements present minimal up-front financial risk to Saks since the company will not invest any capital in the overseas stores. The licensees will own and operate the stores while Saks will get licensing fees based on sales performance. “By having great local licensees, we can be assured that the assortments and operations will be customized for each market,” Martin said.

He also noted that Saks will be able to strengthen its partnerships with vendors by providing “an umbrella” for them to grow their own businesses.
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