SAKS FIFTH AVENUE EXECUTIVES GET FIRED FOR TAKING VENDOR MARKDOWN MONEY:
An internal audit committee found wrongdoing in how some Saks Fifth Avenue executives were collecting "markdown money" from vendors. Those fired were Brian Martin, the chief executive's brother, who was general counsel at Saks Inc. in 2002 - and is now a senior vice president; Donald Watros, the chief administrative officer of Saks Fifth Avenue, who was also asked to forfeit vested options and face "other financial penalties"; and Donald Wright, now the chief accounting officer at Saks Inc.

Although Saks said its own investigation was almost complete, both the Securities and Exchange Commission and the United States attorney for the Southern District of New York are still investigating markdown money at Saks Fifth Avenue. In the traditional practice of collecting markdown money, retailers demand payment from suppliers to cover the cost of putting items on sale when demand is soft - or, at least, when the stores say it is. If the vendors do not go along, suppliers say, the retailers often threaten not to order their clothes again.

Vendors say the stores are increasing their demands, in their rush to bolster profits, and some call the practice blackmail and extortion. In the past, the stores have argued that they had no choice but to try to make up for weak sales. On May 2, 2005, Saks was informed that the United States attorney's office was also looking into the matter.

Initially, Saks announced the amount improperly collected from 1999 to 2003 was about $20 million. The investigations have affected the possible sale of Saks Inc. While some private equity firms said they would be interested in acquiring the whole of Saks Inc. - with or without Saks Fifth Avenue - the company recently announced it would sell two department store units to Belk, a privately owned chain, for $622 million.

Management has also been asked to develop "an action plan for enhanced ethics training," as well as an "ethics 'hotline.'

RETAILER SPEAKS: We spoke with Sandy Labaton, owner of Swimland, a Florida swimwear and headwear retailer in South Florida. Labaton only buys crusher- style hats (he says his customer only wants the convenience of crushables). What his customers do want however, are matching hats to go with swimwear. The swimwear market has finally realized that matching sarongs are the perfect companion for swimsuits. Why not get together with the big companies, such as Jantzen, Ann Cole or Gottex and offer them licensed headwear? Labaton continues to sell straw visors, the “No Headache Company” visors and straw sun hats. Customers are asking for snoods, which are hats with chin ties. If you want to reach Sandy contact him at: 954-966-5055.

SHOW OFF YOUR WARES: Market week is upon us in Dallas and Chicago. The Dallas Market takes place from June 2 to 5th at the Dallas Mart, and is for women’s, children’s and accessory companies. The Chicago Apparel Center is the site of the upcoming trade show from June 3 to 6th for women’s and children’s apparel and accessories for fall ll.