03/21/2014
MCKEE TO THE CASTLE | The executive is leaving behind the London gardens she tends herself for an apartment overlooking the Met. Photography by Robi Rodriguez for WSJ. Magazine
WHEN MARIGAY MCKEE needed to recharge between top gigs at Harrods and Saks Fifth Avenue, where she recently took over as president, she did something unusual: She climbed more than 17,000 feet, to Mount Everest's base camp. Yet even on her Himalayan sabbatical, McKee couldn't resist conducting an on-site focus group.
In Kathmandu, among the bustling chowks, cashmere goats and Buddhist temples were eight American women also adventuring. When McKee noticed one of them carried a Saks handbag, she saw an opportunity and pounced. "I didn't tell them what position I was going to go into at Saks, but I was like, 'Oh, you've got a Saks bag, tell me about Saks,' " McKee says, settling in to an evening cup of tea at her four-story town house in London's Ealing district.
To another ear, the ladies' conversation may have sounded as thin as the high-altitude air, but for McKee, it was rich research. The women, from all over the U.S., talked for hours, and they helped McKee realize a key piece of strategy: Each Saks storefront must appeal to a distinct customer. "The woman from Seattle has a completely different set of wants from the woman in Palm Beach," explains McKee, who came on board after Hudson's Bay Co., a Canadian retail conglomerate, bought Saks last July for $2.4 billion. Geographical sensitivity is just one part of the overall goal to change the course of Saks and resurrect its prestige.
In her almost 15 years at Harrods, McKee helped expand the London landmark into a billion-dollar-plus sales machine, while working her way up from a beauty director to the store's chief merchant, overseeing most retail offerings. McKee is a saleswoman at heart, and she's bringing that approach to Saks: Know your customer, know your merchandise and know your market results.
McKee recalls the surprised reaction to her fashion-department promotion at Harrods years ago. " 'What's the lipstick girl going to teach us about frocks and designers?' " she says, mocking the horror of some colleague. "I remember going to my first fashion week 12 years ago and people being like, 'There's no gift with purchase here!' It surprises me that most fashion buyers know everything there is to know about which trend and hemline we'll be wearing in six months but can't tell me what the density of their sales floor is, what the return is, what the dollars per square foot is, what their top-selling stock-keeping unit is and how many times they've reordered it in the season," McKee continues. "However fashionable the brand, we always start and finish with the numbers—the sell-throughs, the margins, the returns, the contributions—and then we talk about the pleasantries."
McKee was hired at Saks in September, recruited by Hudson's Bay CEO Richard Baker. In the deal, the company—which owns an eponymous chain of 90 stores in Canada as well as Lord & Taylor—picked up Saks's trophy Manhattan flagship, which flanks St. Patrick's Cathedral and faces Rockefeller Center. Baker says he has pledged $200 million to renovate that location. He also plans to install Lord & Taylors in some of Saks's less profitable locations and extend both stores' reach into Canada. (Saks also owns 72 outposts of Off Fifth, a discount operation, which does not fall under McKee's purview.) "We have an opportunity to create the single most fabulous department store in the world," Baker declares.
Before starting her job in January, McKee visited each of Saks's 41 storefronts in 22 states. She envisions the Beverly Hills Saks transformed into a hub for Hollywood stylists and actresses, while Miami's Bal Harbour outpost should cater more to its Hispanic clientele. South Florida will shed the all-black clothing that's better shopped by New Yorkers and Bostonians, and California will cut down on overcoats and heavy tweeds.
SAKS AND THE CITY | Manhattan's flagship store, which opened in 1924, will undergo a $200 million renovation. © Underwood & Underwood/Corbis
AS A COMPANY, Saks has run into the same problems that many retail outlets have faced over the past few years, with a return to a pre-2008 clip proving sluggish and unsteady. With $3.28 billion in sales, 2007 was a record-breaker for Saks. But 2008 was abysmal: Sales dropped to $3.04 billion, and the company posted a net loss of $158.8 million. The next year was bad too, with only $2.63 billion in sales and a net loss of $57.9 million. Since 2010 sales have inched back up year after year—Saks closed 2012 with sales of $3.15 billion and earnings of $63 million—but the third quarter of fiscal 2013 showed a $19.6 million loss, which is significantly bigger than the $12.3 million loss in the same period in 2012.
Back in 1924, when Horace Saks and Bernard Gimbel opened their store on the tony, primarily residential stretch of Fifth Avenue, it was a jewel box of rare merchandise. "Saks was the only act in town," recalls Leonard Lauder, chairman emeritus of Estée Lauder EL -0.82% and a longtime friend of McKee. He remembers stuffing envelopes for his mother Estée's highly anticipated cosmetic launch at Saks in 1947. "It was the gold standard as far as fashion went."
In those early days, Saks carried European stars such as Chanel, Vionnet and Schiaparelli, and by the 1970s it had become the go-to store for leading American designers like Bill Blass, Geoffrey Beene and Oscar de la Renta. The premium product and presentation attracted celebrity clients such as Grace Kelly and Jackie Kennedy. But by the '80s, despite having blossomed into a national chain, the retailer had lost some of its luster. Amid more retail competition and increasingly faster fashion, Saks began to focus on midstream brands like Ellen Tracy, which targeted a mass audience. The company also went through a succession of corporate owners starting in the '70s, shifting market focus or selling off stores with each change of hands.
"When I joined, Liz Claiborne was the number one brand at Saks," says Rosemarie Bravo, who was president of Saks from 1992 to 1997. "It was a fight to bring back luxury product."
“ "When I visit stores around the world, no one takes the viewpoint of 'What would the consumer like?' but Marigay does." ”
——Leonard Lauder
Under Bravo's tenure, brands like Jil Sander, Gucci and Prada came onto the floor for the first time. When Bravo left to lead Burberry, where she hired designer Christopher Bailey (now Burberry's CEO), Christina Johnson was groomed to replace her and took over as president and CEO in 2000. After Johnson left in 2003, there were several years of rapid executive turnover, until Steve Sadove became CEO in 2006. Ron Frasch joined as president in 2007, plucked from his job at Bergdorf Goodman. They executed an impressive gimmick with a new shoe floor so big it qualified for its own zip code: 10022-SHOE. But after taking a punch from the financial crisis during the all-important holiday season in 2008, the retailer resorted to drastic promotional tactics—sales that offered up to 70 percent off, for instance—that hurt its upscale image. Sadove and Frasch tried to regain ground by closing unprofitable stores, but when Hudson's Bay closed the deal last November, the two men were out, along with many of the other high-ranking executives from their reign. (Sadove could not be reached and Frasch declined to comment for this article.)
Baker says he was looking for someone "unusual" to lead in the new era, and that McKee's enthusiasm for the simple retail experience won him over after the two walked the sales floor together. "Additionally, I was enamored with the idea of having a sophisticated, stylish woman run the business," says Baker, "because, of course, we are a store for women."
To draw in those women, Saks must compete with a 21st-century proliferation of retailers outside the realm of traditional department stores. "It's a new day with the way the Internet works and the way shoppers work," says Bravo. "Saks competed with Neiman Marcus, and Macy's was against Bloomingdale's. Now the old formulas don't apply. Exclusives like 'You can only get it at Saks' used to be our calling card. Now, you push a button and get it anywhere."
The blurred lines of distribution and a dizzying mix of high- and low-end merchandise spread across stores that formerly sold either one or the other, are roiling Saks and its competitors, such as Barneys and Neiman Marcus, which also operates 41 stores in the United States, as well as two Bergdorf Goodmans in Manhattan. (Last year, before the Hudson's Bay purchase, Saks reportedly considered a merger with Neiman Marcus, whose spokesperson declined to comment for this story.) McKee's challenge will be to generate a fresh, personal conversation with Saks customers, both online and off—which is what she had done for Harrods.
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STREET STYLE | 'Live the part' was Estée Lauder's business advice to McKee. Clockwise from top left: McKee outside a Donna Karan show; hugging her dear pal Leonard Lauder; with Michael Kors; hosting a Harrods luncheon; hanging with Manolo Blahnik; and having fun with Lady Gaga. Ian Gavan/Getty Images, Courtesy of Harrods (3); Mark Sullivan/Wireimage; Getty Images
