Saks Inc. Narrows Q2 Loss, Improves Margins

Saks Fifth Avenue flagship

New York–Saks Inc.’s fiscal second-quarter loss narrowed on rebounding sales and improved margin due to better inventory management.

For the quarter ended July 31, Saks posted today a loss of $32.2 million, or 21 cents a share, compared with a year-earlier loss of $54.5 million, or 39 cents a share. The latest quarter included eight cents in store-closure charges. Net sales rose 5.1% to $593.1 million. A poll of retail recently forecast a loss of 17 cents on $585 million in sales.

Gross margin jumped to 37.3% from 30.3%, beating the company’s May estimates as the retailer said it saw consumers returning to buy full-priced merchandise again. The store had cut promotions and worked with designers to create new offerings at lower retails. Among the categories faring well in the quarter were footwear, handbags, women’s designer apparel and accessories and men’s tailored clothing. The company’s New York City flagship store continued to outperform the rest of the company’s stores.

Categories that haven’t been performing well include denim, fine jewelry and some areas of contemporary clothing. Steve Sadove, ceo, told retail analysts in a conference call today that the company has a plan to address issues with specific brands and categories by hiring 35 local marketing managers to help drive growth. The company’s sales associates now have their own business plans to increase sales.

Although the company was focused on cutting costs two years ago as consumers pulled back discretionary purchases, Sadove said Saks is now investing in certain categories and markets and moving forward with its business.

“This year we have started to move cautiously and selectively from defense to offense,” he said.

Store Closings

Saks closed three underperforming stores in the last quarter, too:  Portland, Oregon, Charleston and San Diego. It also plans to close stores in Plano, Texas, and Mission Viejo, California.  Sadove said those stores were unprofitable and the company’s most troubled stores in the country. Employees will be offered the options of transferring to other stores or taking a severance package.

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