DOW JONES NEWSWIRES
Saks Inc.'s (SKS) fiscal second-quarter loss widened on lower
margins as markdowns continued to fail to stem the high-end chain's
woes. The luxury retailer's bottom line widely beat analysts'
expectations.
Shares were recently up 11% at $5.95 in premarket trading.
The industry was expected to be less vulnerable to the downturn
than lower-priced retailers, but luxury brands have seen sales
slump amid a broad slide in consumer spending. For its part, Saks
has been cutting prices, but steep discounts on designer goods
could hurt in the long run as shoppers may be resistant to paying
full price after seeing such big markdowns.
The company has said it plans to retain its status as a luxury
retailer, but it was looking to sell a greater amount of cheaper
name-brand merchandise and turn its outlets into something more
than just a way to offload excess inventory.
Chairman and Chief Executive Stephen Sadove said although the
economy remains difficult, he was pleased with the company's
expense management. He added gross margin exceeded the company's
expectations.
Sadove also said the economy continues to make predicting future
sales and margins difficult.
For the period ended Aug. 1, Saks posted a loss of $54.5
million, or 39 cents a share, compared with a year-earlier loss of
$32.7 million, or 24 cents a share.
Net sales fell 15% to $561.7 million. Two weeks ago, the company
reported same-store sales fell 16%, helped by the shift of a
one-time designer sale that the company shifted into June after
hosting it in May last year. Excluding that shift, same-store sales
would likely have fallen about 19%.
Analysts polled by Thomson Reuters expected a loss of 52 cents
and revenue of $563 million.
Gross margin fell to 29.9% from 34.6% on the clearance event
shift and increased markdowns. Inventory fell 18% from a year
earlier on a per-store basis.
The company said it continued to see weakness across all
categories and locations, and the sales decline at its New York
City flagship store continued to be higher than the overall
drop.
Saks affirmed its outlook for a fiscal-year same-store sales
decline in the low double-digits.
-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353;
kerry.benn@dowjones.com