Saks posts profit in 4Q on full-price sales

AP News
Posted: Feb 23, 2011 11:49 AM
Saks posts profit in 4Q on full-price sales

Saks Inc. sold more items at full price and used fewer promotions in its fiscal fourth quarter, helping it post a profit and boosting its gross margin.

The results announced Wednesday by the department store chain support mounting evidence that luxury shoppers are beginning to spend again, as Saks posted better results at its upscale Saks Fifth Avenue stores than at its off-price OFF 5th locations.

The New York company, which is cautiously optimistic about the overall tone of its business and customer response to its actions, expects an increase in a key revenue figure in 2011.

Saks' stock rose 14 cents to $12.31 in midday trading.

For the fourth quarter, Saks posted net income of $25 million, or 14 cents per share. A year ago the company lost $4.6 million, or 3 cents per share.

Adjusted earnings were 13 cents per share, which removes a penny per share for a gain tied to some Saks Fifth Avenue store closings, pension charges and other items. Analysts polled by FactSet expected earnings of 6 cents per share.

Revenue for the period ended Jan. 29 rose 7 percent to $866.3 million from $811.3 million. This surpassed Wall Street's estimate of $854.4 million.

Saks said revenue at stores open at least a year climbed 8.4 percent in the quarter _ the fourth straight quarter that there was an increase. This was better than the chain's forecast for the figure to climb in the mid-single digits.

Revenue at stores open at least a year is a key indicator of a retailer's health because it measures results at existing stores instead of newly opened ones.

Saks reported strong sales of women's and men's clothing, handbags and shoes at its Saks Fifth Avenue stores. Revenue at Off 5th stores open at least a year was said to be below the company's 8.4 percent rise. Saks Direct, which includes online sales, had an approximately 36 percent increase in the figure.

Gross margin improved to 37.8 percent from 36.5 percent due to more full-price sales and fewer promotions.

Full-price sales, which were on the decline during the recession, appear to be making a bit of a comeback, particularly in the luxury sector. Aside from Saks, Nordstrom Inc. reported last week that its fourth-quarter earnings climbed in part because of customers buying items at full price.

"As we've always said, we remain steadfastly committed to the luxury business, where striking the right balance not just in price but in lifestyle remains a key differentiator for Saks," President and Chief Marketing Officer Ronald Frasch said during a conference call.

He indicated that the company does anticipate some price increases in the fall, but that they will be related to more expensive fabrics and furs coming into its stores.

"The fashion will in itself dictate higher prices for the fall season," Frasch said.

Chairman and CEO Stephen Sadove said the company took a strategic approach to its promotions, reducing the duration of certain promotional events and getting rid of others altogether. Saks also lowered the discount percentage offered with its Friends & Family promotions and pulled back on the participation of certain vendors in promotions.

For the year, Saks posted net income of $47.8 million, or 30 cents per share. That compares with a loss of $57.9 million, or 40 cents per share, in the previous year.

Annual revenue rose 6 percent to $2.79 billion from $2.63 billion. Revenue at stores open at least a year climbed 6.4 percent.

Looking ahead, the company anticipates revenue at stores open at least a year will rise in the mid-single digits for the full year.

Saks currently has 47 Saks Fifth Avenue stores and 57 Off 5th locations.