Saks posts 2nd-quarter loss on charges

AP News
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Posted: Aug 14, 2012 5:50 PM
Saks posts 2nd-quarter loss on charges

NEW YORK (AP) — Saks Inc.'s loss widened in the second quarter from a year ago, as results were dragged down by charges related to closing stores and opening a fulfillment center in Tennessee.

But the luxury department store chain, which operates Saks Fifth Avenue, reiterated its sales forecast for the second half of the year, underscoring how wealthy shoppers are proving to be resilient in a yo-yo economy.

Saks' shares rose more than 6 percent.

Like many luxury retailers, Saks has seen its affluent shoppers return to spending freely on status goods since the recession. But the volatility in the stock market and the financial crisis in Europe are creating some challenges. Earlier in the spring, Saks had to step up discounting, but the latest results, which beat Wall Street estimates, show solid spending by its wealthy clientele.

Saks is working hard to attract shoppers in stores and online. It is renovating a string of locations, which include an expanded shoe department. It's also changing its computer systems to help it blend its physical stores with its online business. That should help it position itself to attract more online shoppers.

"While the overall near-term macro-economic environment remains uncertain, we continue to be optimistic and excited about the future of Saks and our ability to generate continued growth," Sadove told investors after the earnings release. "We will remain focused on executing our core merchandising services and marketing strategies. We are also taking a long-term view. This is a transitional time for retail and for our company."

The New York company said Tuesday that it lost $12.3 million, or 8 cents per share, for the three months ended July 28. That compares with $8.37 million, or 5 cents per share, a year ago. Excluding charges, Saks lost 5 cents per share in the latest quarter.

Revenue rose 5 percent to $704.1 million.

Analysts surveyed by FactSet had expected a loss of 9 cents on revenue of $704.9 million, on average.

Revenue at stores open at least a year rose 4.7 percent for the quarter. It's considered a key measure for gauging retailers' health because it excludes the impact of stores that have opened or closed in the past 12 months.

Company executives said it continues to be challenged by slow sales of classic women's designer brands and has been changing its inventory to respond to shoppers' penchant for contemporary and fashion-forward styles.

Over the past five years, Saks has renovated nearly every floor of its New York flagship store. This month, it will unveil its expanded 10022-Shoe department taking over the part of the eighth floor it didn't already occupy. The shoe department's space will grow more than 40 percent and will include the first Louis Vuitton shoe shop within a department store.

Saks executives noted that the 10022-Shoe department is the second-most productive floor in the Manhattan flagship.

Meanwhile, Saks is working with Oracle in an ambitious project called Project Evolution that will deliver new computer systems including merchandising and finance. That will help Saks meld its online business with its physical stores. For example, by fall 2013, the company plans to be able to fulfill online orders from its Saks Fifth Avenue stores.

Saks said it will no longer be reporting revenue at stores open at least a year on a monthly basis. The move follows a string of other merchants like Abercrombie & Fitch Co. and American Eagle Outfitters Inc. who are now reporting only quarterly.

Shares of Saks rose 67 cents, or 6.2 percent, to close at $11.52 Tuesday.