New York—Despite an increase in sales, Saks Inc. reported today that its second quarter loss widened due to costs associated with store closures and its new fulfillment center.
For the quarter ended July 28, the parent of Saks Fifth Avenue and OFF5th reported a loss of $12.3 million, or 8 cents a share, compared with a loss of $8.4 million, or 5 cents a share a year ago. Excluding pre-opening costs associated with its new fulfillment center in Tennessee, asset impairments and store closing costs, the company posted a loss of 5 cents a share.
Total net sales grew 5% to $704.1 million with total comparable store sales up 4.7% on top of a 15.5% increase a year ago. Gross margin narrowed to 37.2% from 38% on markdowns.
The loss, however, was less than what analysts anticipated at 9 cents a share while the company’s sales exceeded their estimate for $703.9 million.
Sales of Jewelry, Shoes Rise
“While our second quarter results (before certain items) were approximately flat with the prior year second quarter results, we were able to post a modest increase in year-over-year net income (before certain items) for the six months in spite of a challenging economic environment,” said Stephen Sadove, chairman/ceo.
Several merchandise categories showed sales strength during the second quarter, including women’s and men’s contemporary apparel, women’s and men’s shoes, fashion and fine jewelry, and cosmetics and fragrances. The New York City flagship store sales performance was positive but modestly below the comparable store sales performance of all Saks Fifth Avenue stores.
Although planning to keep a tight reign on inventory levels in the second half, Saks said it sees sales growth in the third and fourth quarters. Comparable store sales for the second half are expected in the mid-single digit range with “comparable store inventory levels are expected to be up in the mid-single digit range throughout the balance of the year.”
Based upon current inventory, its promotional calendar and markdown schedule, the company expects its year-over-year gross margin rate to increase approximately 25 to 50 basis points in the second half.
Management expects the year-over-year improvement will be concentrated in the fourth quarter, with the third quarter year-over-year gross margin rate expected to be relatively flat.