Saks Incorporated updates outlook for balance of 2010
Retailer Saks Incorporated announced results for the first quarter ended May 1, 2010.
Overview of Results for the First Quarter
For the first quarter ended May 1, 2010, the Company recorded net income of $18.8 million, or $.11 per diluted share. Those results included after-tax charges totaling $1.1 million, or $.01 per share, primarily related to severance expense and other store closing costs associated with the Portland, Oregon; San Diego, California; and Charleston, South Carolina Saks Fifth Avenue store closings.
For the first quarter ended May 2, 2009, the Company posted a net loss of $5.1 million, or $.04 per share. Excluding the after-tax loss from discontinued operations of $0.2 million, the Company recorded a loss from continuing operations of $4.9 million, or $.04 per share.
Comments on the First Quarter Ended May 1, 2010
Stephen I. Sadove, Chairman and Chief Executive Officer of the Company, noted, "I am very pleased with our first quarter operating performance. These results exceeded our expectations and were driven by comparable store sales growth, gross margin expansion, and expense leverage. The Saks team has carefully navigated through the challenging environment, and we are now moving cautiously from defense to offense.
"Our 6.1% first quarter comparable store sales increase was generated in a period during which we strategically reduced our promotional activity."
Sadove concluded, "Saks Fifth Avenue has great potential. While approaching the future carefully and cautiously, we are focused on driving additional revenue growth, gross margin expansion, and a return to annual profitability. Our entire team is committed to the collaboration, innovation, and superb execution needed to realize our long-term financial and operating goals and to enhance shareholder value."
In the Saks Fifth Avenue stores, several merchandise categories showed strength during the quarter, including women's and men's apparel, handbags, shoes, and jewelry. For the quarter, the New York City flagship store sales performance continued to exceed the Company's aggregate comparable store sales performance.
Saks Direct posted an approximate 33% comparable store sales increase in the quarter. OFF 5TH's comparable store sales performance was below the Company's aggregate comparable store sales performance for the period.
The Company generated meaningful year-over-year gross margin rate improvement in the first quarter, up 440 basis points to 43.1% this year from 38.7% in last year's first quarter. The improvement exceeded management's expectations and resulted from carefully managed inventory levels, increased full-price selling, and a reduced level of promotional activity.
Managing Selling, General, and Administrative expenses ("SG&A") continues to be a top priority for the Company. As a percent of sales, SG&A expenses were 24.5% this year compared to 25.4% in the prior year first quarter, equating to 90 basis points of leverage.