Saks 1st-quarter profit soars 51 percent

AP News
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Posted: May 17, 2011 6:18 PM
Saks 1st-quarter profit soars 51 percent

Saks Inc., the upscale department store chain, said Tuesday that its first-quarter net income rose 51 percent from a year ago and called the increase a signal that luxury spending is rebounding.

"We are increasingly optimistic about the future," CEO Stephen Sadove said in a call with analysts. He said customers are buying at full price more often and gravitating to high-end products.

"People are buying the special items," he said. "I think that we feel good about the selling."

Saks suffered in the recession as shoppers cut back on non-necessities. It lost money for five straight quarters beginning in spring 2008, then it wavered for a year between reporting net losses and profits. Tuesday's results mark a third consecutive quarter of profits.

Sadove said the company continues "to move from defense to offense."

The company's revenue rose 9 percent in the quarter. Executives said upgrading distribution-center technology, improving the company's website and shifting some marketing spending from national to local audiences also helped Saks' performance. Previous moves to cut costs and close struggling stores also played a role. Managing expenses "will remain a top priority," Sadove said.

Online sales are becoming increasingly important to the luxury retailer. Sadove said employees will soon be able to access data about customers' online purchases when they visit a store.

"Offering consistent, personal and memorable experience builds loyalty. Loyal customers spend more. It is that simple," said Ron Frasch, president and chief merchandising officer.

Saks said it earned $28.4 million, or 16 cents per share, up from $18.8 million, or 11 cents per share, in the first quarter a year ago.

Revenue was $726 million, up 9 percent.

Revenue at stores open at least a year rose 10.2 percent. That comparison is an important measure of a company's health, because it excludes stores that recently opened or closed.

Saks Direct, which sells online, was the strongest performer by that measure, increasing revenue by 25 percent. Saks Fifth Avenue stores were in line with the company average, while OFF 5th, the company's outlet chain, performed less well.

Saks didn't give specifics about OFF 5th's performance. It announced Monday after the market closed that it planned to open four new OFF 5th stores.

Saks shares fell 7 cents to close Tuesday at $11.20.