Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=164809
Story Retrieval Date: 6/19/2013 5:23:09 AM CST
Luxury department store owner Saks Inc. recovered from a year-ago loss to post a first-quarter profit Tuesday, beating Wall Street expectations.
The New York-based apparel and accessories retailer reported earnings of $18.9 million, or 11 cents per diluted share, in the quarter ended May 1, compared with a loss of $5.1 million, or 4 cents per diluted share, in the year-earlier period.
“We continue to believe Saks is responding appropriately from its obvious expense discipline to taking modest amounts of strategic risk in its direct business, exclusive merchandise and assortment,” said Michael Exstein, a Credit Suisse analyst who retains his rating of underperform.
Year-ago results included an after-tax loss from discontinued operations of $200,000.
Analysts surveyed by Bloomberg LP were expecting a loss of 26 cents per diluted share..
Sales rose 7 percent to $667.4 million from $624.3 million. Comparable-store sales increased 6 percent.
“The improvement exceeded our expectations and resulted from carefully managed inventory levels, increased full-price selling, and a reduced level of promotional activity,” said CEO Stephen Sadove in a press release.
Saks carries high-end label merchandise, which is sold at 53 Saks Fifth Avenue stores, 55 discount Off 5th stores and through saks.com. Saks plans to open five new Off 5th stores this year. In the Chicago area, Saks operates two Saks Fifth Avenue stores and two Off 5th stores. .
The company’s positive monthly same-store sales have eased concerns over merchandising risk and competitive pressures, stated a Standard & Poor’s report that retains a hold rating. S&P said it expects the Off 5th stores and online channels to increase brand awareness, and a full-price sales increase from “improved confidence among core affluent shoppers.”
“We look for Saks to weather a soft sales environment through a merchandising focus on its most productive brands at its full price stores,” the note said.
As part if its outlook for the year, Saks will work with vendors to lower initial pricing, offer more limited edition products and improve customer service, the company stated.
Saks will continue to be fiscally conservative but will take on risks, said Sadove. “As we move through 2010, we know consumers will continue to be discriminating the expectations for service and differentiated product with value will be even higher.”
Saks shifted a portion of its budget away from national marketing efforts in order to focus on local marketing and business development. This summer Saks will test a “hold and flow system” which will use consumer demand to dictate product distribution.
Saks shares closed Tuesday at $8.94, down 40 cents.