Overview of Results for the First Quarter Ended May 4, 2013
For the first quarter ended May 4, 2013, the Company posted net income of $20.0 million, or $.13 per diluted share.The results included after-tax items totaling $10.1 million comprising $2.3 million of store closing costs and a $7.8 million non-cash loss on extinguishment of debt related to the Company’s redemption of its $230 million 2% Convertible Senior Notes.
Excluding these items, the Company would have recorded net income of $30.1 million, or $.19 per share, for the first quarter ended May 4, 2013.For the prior year first quarter ended April 28, 2012, the Company posted net income of $32.1 million, or $.18 per diluted share.
The results included after-tax items totaling $0.6 million comprising $0.4 million of pre-opening costs associated with the 2012 opening of the Company’s new Tennessee fulfillment center and $0.2 million of store closing expenses.
Excluding these items, the Company would have recorded net income of $32.7 million, or $.19 per share, for the first quarter ended April 28, 2012.
Comments on the First Quarter Ended May 4, 2013
Stephen I. Sadove, Chairman and Chief Executive Officer of the Company, noted, “I am pleased with our first quarter comparable store sales growth of 5.9%, which was on top of a solid 4.8% increase in last year’s first quarter.
"I am also pleased that we maintained a 44.4% gross margin rate, which was flat with last year, in an increasingly promotional environment. As expected, we experienced SG&A deleverage in the quarter as we continued to invest in our omni-channel and other important initiatives.”
The fiscal year ended February 2, 2013 included an extra week, creating a 53-week fiscal year that occurs every six years in the accounting cycle for many retailers, versus a 52-week fiscal year in other years.
This 53rd week and later fiscal year end has pushed each of the quarter ends in 2013 later than in the prior year and is distorting certain comparisons. Adjusting for this distortion (comparing the 13 weeks ended May 4, 2013 with the 13 weeks ended May 5, 2012), the current year first quarter comparable store sales increase would have been approximately 4.2%.
“Several merchandise categories showed sales strength during the first quarter, including women’s contemporary and advanced designer apparel; dresses; women’s shoes; handbags; children’s apparel; and men’s accessories, shoes, and contemporary apparel,” Sadove continued.
“The New York City flagship store sales performance was positive but modestly below the comparable store sales increase of the Company’s Saks Fifth Avenue stores in the aggregate for the quarter.”
As a percent of sales (excluding certain items), SG&A expenses were 26.7% in the first quarter this year compared to 25.2% in the prior year first quarter. As anticipated, the Company experienced deleverage in the quarter primarily related to incremental expenses to support its omni-channel and Project Evolution (technology) initiatives as well as additional marketing expenses targeted to maximize omni-channel revenues.
The Company generated operating income (excluding certain items) of 7.5% of sales in the current year first quarter compared to 8.7% in the prior year first quarter.
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