Saks Inc. reported a much smaller second-quarter loss on Tuesday as the luxury retailer managed to sell more items at full price and increase its revenue.
But the New York department store chain said that it was heading into the fall season with more caution due to recent stock market volatility and uncertain economic conditions.
Its stock fell 42 cents, or 4.6 percent, to $8.65. The shares have traded between $6.60 and $12.97 over the last year.
Chairman and CEO Stephen Sadove said during a conference call that temporary stock market dips don't have a material impact on Saks, but that severe market corrections or prolonged downturns have historically hurt the company.
"None of us knows what the future will bring. However, I'll note that Saks in in a much stronger position than we were in late 2008," Sadove said, citing Saks' more tightly controlled inventory, strong balance sheet and reduced capital spending.
Luxury sales have rebounded since the recession. While quarterly sales were healthy, Saks lost money because, like many others in the sector, it is contending with higher costs and expenses.
Saks lost $8.4 million, or 5 cents per share, for the period ended July 30. That compares with a loss of $32.2 million, or 21 cents per share, a year earlier.
Removing an impairment charge, pension charge and other items totaling $800,000, its adjusted loss was $7.6 million, or 5 cents per share.
Last year's quarter included $11.7 million in charges.
The performance beat the loss of 9 cents per share analysts surveyed by FactSet expected.
"Through the second quarter, our customers remained confident and continued to respond to our differentiated merchandise, service initiatives, and creative marketing," Sadove said.
The chain's quarterly profit margins improved to 38 percent from 37.3 percent, mostly because Saks sold more goods at full price.
Sadove said the company's full-price selling is currently above prerecession levels.
"If you look at the first half of the year, we saw a substantial (same-store revenue) increase despite a reduction in the amount of promotion that we've done and you're going to continue to see that going into the fall season," Sadove said.
But like many retailers, Saks is facing higher costs for the materials its good are made of. Cost of sales increased to $415.6 million in the quarter, up from $371.9 million during the same period last year.
The company was also weighed down by higher selling, general and administrative expenses, which rose to $183.4 million from $170.6 million.
Revenue rose 13 percent to $670.2 million, surpassing the $657.4 million Wall Street expected.
Revenue at stores open at least a year increased 15.5 percent, topping Saks' expectations. This figure is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.
President and Chief Merchandising Officer Ronald Frasch said Saks has reported double-digit increases in that figure in five of the past six months.
The retailer expects the measurement to rise in the mid- to high single-digit range during the second half of the year, which includes the critical holiday shopping season.
The company's Saks Fifth Avenue stores reported strong sales of women's clothing, women's shoes, men's clothing and men's accessories.
Saks Direct, which sells online and has become an increasingly important way for Saks to reach its customers, reported a 50 percent jump in revenue.
Saks said it is also engaging with shoppers more through Facebook and Twitter and will launch a mobile app in September.
Sadove said the company is also ramping up its flash sale efforts. While he said that Saks has held several flash sales over the last couple of years, the retailer rolled out a web site called Saks Fashion Fix this month specifically geared to such limited-time sales.
Sadove said Saks plans to hold nine flash sales a week. These sales are expected to start by the end of August.
Saks runs 46 Saks Fifth Avenue stores and 59 Off 5th stores.