Saks 3Q profit falls but tops Street's view

AP News
Posted: Nov 15, 2011 9:16 AM
Saks 3Q profit falls but tops Street's view

Saks Inc.'s third-quarter net income slid 51 percent from results a year ago that benefited from a large tax reserve-related gain. But its latest performance topped Wall Street's expectations and its revenue increased on more full-price selling and fewer promotions.

"We continue to be optimistic about the future of luxury retailing in general and for Saks Fifth Avenue in particular, and we believe Saks is well-positioned for additional operating margin improvement over time," Chairman and CEO Stephen Sadove said in a statement.

He added that the company would continue to use a cautious and strategic approach going forward due to economic and political conditions.

The New York department store chain reported net income of $17.8 million, or 11 cents per share, for the period ended Oct. 29, down from $36.3 million, or 20 cents per share, a year earlier when it had the gain of 14 cents per share.

Taking out the gain, Saks had earnings of 6 cents per share in the year-ago period. Analysts surveyed by FactSet forecast adjusted earnings of 9 cents per share.

The retailer's stock gained 20 cents, or 2 percent, to $10.40 per share in premarket trading.

Revenue rose 5 percent to $692.3 million from $658.8 million, beating Wall Street's prediction of $690.6 million.

Revenue at stores open at least a year rose 5.8 percent. This metric is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.

Saks Direct, which sells online, reported a 24 percent rise in same-store revenue. Saks said that revenue at Off 5th stores open at least a year was softer than expected.

The retailer said that the strongest categories at its Saks Fifth Avenue stores included women's contemporary clothing, women's shoes, handbags, jewelry, men's clothing, shoes and accessories.

Saks said Tuesday that it expects a mid-to-high single digit percentage rate increase in fourth-quarter same-store revenue. It anticipates its gross margin rate will fall in the quarter, but that it will still have an improved gross margin for the second half and full fiscal year.

Saks currently runs 46 Saks Fifth Avenue stores and 60 Off 5th locations.