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A Cut Above : Designers and Department Stores Are Making Deals That Add Up to Big Discounts


Call it a mild case of reverse sticker shock.

The Nancy Heller for Saks Fifth Avenue boutique opened Saturday at Little Santa Monica and Rodeo Drive. And, yes, this is the same Nancy Heller who cut a swath through the '80s with her high-priced, casual designer sportswear. But the price tags on Heller's clothes--cashmere sweats, washed silk separates, cotton knit tops, leather jackets--are all 30% to 40% lower, and you'll only find her line at Saks, or new free-standing boutiques like this one.

What's going on here is something new. Call it factory direct retailing on the designer level. Or call it the latest shot in the battle with discounters.

"It's one of (our) major strategic directions," says Phil Miller, Saks chief operating officer and vice-chairman, who points out that the chain has been buying A/X (Armani Exchange) franchises, and signing exclusive agreements with other designers, including Gucci, Gordon Henderson and Peter Nygard.

Miller says private labels, including house brands like Real Clothes, The Works and Saks Fifth Avenue Collection, are some of the fastest-growing areas in the store. Cutting deals with designers is a new twist to that part of the business.

Art Snyder, the president of Nancy Heller and Heller's partner outside the office, approached Saks eight months ago with the franchising plan, and Saks execs said yes within the space of a day.

Heller rose to fame on the strength of her sportswear, which has the comfort level of pajamas, yet would be at home in a Malibu restaurant. And at the time, the prices were consistent with Malibu-level incomes.

The company, which bears her name, recorded $30 million in sales in 1990 but was hit hard by the recession.

Heller had a warehouse filled with inventory that wasn't moving. Faced with taking on partners to jump-start her business or quitting while she was still ahead, she chose the latter. She stopped shipping the line last spring. But Heller couldn't stop thinking about loyal shoppers buying armloads of clothes at one of her yearly warehouse sales. So she and Snyder set up a plan to offer the same goods at a reduced price.

Snyder set up a deal that would allow factories to ship directly to stores. "This eliminated showrooms, warehousing and distribution centers," Snyder explains. "It eliminated the middle costs."

A suede zip-up bomber that was $550 is now $395. A cotton knit bow T-shirt was $32 and now costs $24. Basic linen jackets were $290, and today's emblem-decorated versions are $185. The basic sweater in cashmere was $370; it's now $250. A $550 four-ply silk tunic jacket used to be $900.

Saks just launched 16 in-store Heller shops and is building several free-standing stores in Florida. It will open more boutiques this fall. Snyder also made deals in Canada for 12 stores and licensed another store in Aspen.

But for Nancy Heller, opening this first hometown flagship store was the watershed. As she greeted guests at the stores opening party Friday night, the designer beamed. "It's done. It's finished, " she said. "And it's just the beginning."

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