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Saks CEO: ‘We think we’ll hold on’ to the luxury consumer

Saks CEO Marc Metrick joins Yahoo Finance Live to discuss how the current inflationary environment has affected sales and the overall luxury industry.

Video Transcript

- Inflation is taking its toll on Americans. Consumer sentiment falling to a record low in June. And that was before today's very hot inflation print. But it's not all bad news. There's a new survey that shows that the luxury sector is a bright spot. Joining us now, Marc Metrick. He's CEO of Saks. And Marc, it's great to see you. I know the luxury survey that you just put out paints the consumer in a pretty strong light here, just in terms of the fact that they are still willing to spend. We have, however, seen inflation creep steadily higher. We're at a new 40-year high. Any worry that we're going to start seeing that high-end consumer pull back on their spending?

MARC METRICK: Look, we're in the discretionary business. So at any point, there are some of our customers have to make a decision on whether they want to spend on luxury goods. And we have to worry about those consumers as the decisions become harder. But the core luxury consumer-- so defined as those who have household incomes above $200,000, they don't have to make that decision so deliberately. And we think that will hold on with those guys as we push through.

- A recent survey from Payments.com actually showed a third of those making $250,000 a year or more in the US have had to cut back and are living paycheck to paycheck. Where, if anywhere, are you seeing that in your numbers?

MARC METRICK: We're not seeing that. And again, I think you also have to look at cut back on a relative basis. The last year, we've seen-- and so many others have seen-- unprecedented levels of consumer engagement and spend. So if somebody says they're slowing down, that still might be their sell they're spending at extraordinarily high levels. But again, we were up 70% in the first quarter of this year, which ended April.

And then the luxury poll survey, which we put out into the field in May, 76% of customers, of luxury customers with household incomes of $200,000 or more, indicated that they'd spend the same if not more the next three months than in the prior three months. So we haven't seen it in our numbers have an effect. And the consumer hasn't told us that it'll have an effect. But of course, we have to watch this very carefully.

- So Marc, in terms of whether this is a factor to do more with inflation versus perhaps buying more products and services, where do you place that ratio?

MARC METRICK: It's interesting because in luxury, I look at-- we are what I call a GOAT business. So we are a go out and travel. So I'm not so afraid of experiential spending. So if somebody wants to take a vacation, if they want to go to a concert, if they have to go to a wedding, if they have to even go back to work, which isn't even experiential, I'm part of that equation. So I'm OK with that. And one of the respondents coming out of the survey indicated that we were right up there with where people were going to be spending money over the next few months.

- Hey, Marc, what regions are you seeing people spend the most? I guess, are you seeing various shopping behavior patterns based on where people live? And maybe the higher end where the cost of living every day expenses are a little bit higher, you're starting to see the consumer make some, I guess, different choices than what they were making just a couple of months ago?

MARC METRICK: Look, as an e-commerce business, I'm not looking at things as much as I used to geographically. But I'll tell you our Saks Fifth Avenue, even the stores are located in pockets in the United States where the consumer is probably different. I wouldn't necessarily use that as a gauge. But again, we're not seeing pockets of the US, online at least, perform differently from one another.

- So I've never heard the term GOAT used the way you did. To most of it, it's greatest of all time. And I've also never thought about Saks as having anything to do with travel. Tell me about how you see Saks as a GOAT company and how you define it.

MARC METRICK: Yeah. And we'll go to both ends of the spectrum. If you're not going anywhere not doing anything, you don't have to get dressed up. And then take incrementally each step from there. So now I'm just going to get the mail. Then I'm not just going to get the mail, I'm going go grocery shopping. As you get closer to, I'm going to take a vacation for the first time in two years, I want to look good when I go out to dinner, I want to look good when I'm walking around, I've got to get a bathing suit, I'm going to have four outfit changes on my vacation per day, that's where Saks comes in. And you could see it in our marketing. We're really getting out there with it. And I think it's working for us.

- And Marc, I want to ask you about the demographics because looking at some of this information, looking at what younger spenders are doing versus, say, boomers and older generations, what are you seeing? And why are you seeing that? And are you worried perhaps that some of these buy now, pay later issues may crop up as some of these younger spenders who aren't potentially financially as literate may make some mistakes here?

MARC METRICK: Yeah. Look, we're watching that carefully. And we have a buy now, pay later option as part of our experience. And we're watching that. And it doesn't overindex into how we're doing business. So that's one item. And I think it's recency bias. I think when you look at the younger cohort of consumer, they haven't been through a moment like we're going through.

So it's probably different. And we have to be mindful of how they might respond to questions or how they might be thinking about things today and how that's going to affect behavior in the next few months. It might be different than, say, a boomer or older that's seen this and been there and understands what's ahead. But, look, we're going to stay on strategy. We're going to deliver amazing service and product. And the consumer is going to be there.

- Well, they certainly are so far. We do appreciate you joining us today. Marc Metrick there, Saks CEO. Thank you so much.