DOW JONES NEWSWIRES
Saks Inc. (SKS) swung to a fiscal first-quarter loss but widely
beat analysts' expectations as markdowns continued to fail to stem
the woes hitting high-end chains.
Shares were recently up 11.5% at $4.55 in premarket trading as
the upscale retailer also cut its outlook for fiscal-year capital
spending 8.3% to $55 million and said overhead-cost cuts should be
up to double the as-much-as $30 million previously expected.
The industry were expected to be less vulnerable to the downturn
and cheaper-priced retailers, but luxury brands have seen sales
slump amid a broad slide in consumer spending. For its part, Saks
has been cutting prices to avoid massive losses, but steep
discounts on designer goods could hurt in the long run as shoppers
may be resistant to paying full price after seeing such big
markdowns.
The company said last month it plans to retain its status as a
luxury retailer, but it was looking to sell a greater amount of
cheaper name-brand merchandise and turn its outlets into something
more than just a way to offload excess inventory.
For the period ended May 2, Saks posted a loss of $5.1 million,
or 4 cents a share, compared with year-earlier income of $17.3
million, or 12 cents a share. Analysts polled by Thomson Reuters
expected a 26-cent loss.
Net sales dropped 27% to $621.3 million. The company reported
two weeks ago that same-store sales fell 28%.
Chairman and Chief Executive Stephen Sadove said Tuesday the
sales environment remains "extremely difficult," but added Saks is
carefully managing inventories, expenses and capital spending. The
company continued to see weakness across all regions, merchandise
categories and distribution channels. Weak results at its flagship
New York City store persisted as well.
Gross margin rose to 38.4% from 38%, helped by the shift of a
spring clearance sale to the current quarter this year from the
first quarter last year. That shift will boost second-quarter sales
but hurt margins.
Inventory fell 7.4% on a per-store basis.
Saks affirmed its outlook for a fiscal-year same-store sales
decline in the low double-digits, including a drop in the mid-teens
for the second quarter.
Moody's Investors Service cut its long-term credit ratings on
Saks to the edge of highly speculative territory in March, saying
the company will generate operating losses for the next year.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com