Saks' 1Q profits up, but revenue disappoints

AP News
Posted: May 15, 2012 9:11 AM
Saks' 1Q profits up, but revenue disappoints

Saks reported a 13 percent bump in first-quarter profit, but sales came in well below Wall Street expectations.

The New York company said Tuesday that it has seen a sales slowdown in women's designer clothing and expects that extra markdowns will erode profit margins for the current quarter. Shares slid more than 3 percent in premarket trading.

Affluent shoppers have been going back to splurging on status goods since late 2009. But the shortfall in sales at Saks, a barometer of luxury spending, could signal that the affluent are feeling queasy amid growing signs of a spring economic slowdown for the third year in a row. Those worries as well as an escalating debt crisis in Europe have weakened the stock market in recent weeks.

Saks posted earnings of $32.1 million, or 18 cents per share, compared with $28.4 million, or 16 cents per share last year.

Excluding costs related to the construction of a new fulfillment center, Saks would have earned 19 cents per share. That edged out Wall Street expectations by a penny, but investors focused on revenue.

Revenue rose 3.8 percent to $753.6 million, short of the $761.7 million expected by analysts, according to a poll by FactSet. Revenue at stores opened at least a year rose 4.8 percent for the quarter. The measure is considered a strong indicator of a retailer's health because it excludes the volatility from stores recently opened or closed.

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"Year-over-year first quarter sales growth was solid but not as robust as in prior quarters," said Chairman and CEO Stephen Sadove. "While we continue to see overall growth in the business, certain areas experienced a deceleration in sales."

Sadove noted that in particular women's designer clothes didn't fare well. Consequently, the company is discounting the merchandise, a move that could trim profit margins in the current quarter.

Shares of Saks Inc. fell 35 cents to $9.70 before the market opened in electronic trading.