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Saks CEO pleased with Q3 operating performance
17 Nov '10
5 min read
Saks Direct posted approximate 21% and 25% comparable store sales increases for the third quarter and nine months, respectively. OFF 5TH's comparable store sales performance was below the Company's aggregate comparable store sales performance for both the quarter and nine months, although sales trends improved in October 2010.
The Company generated year-over-year gross margin rate improvement in the third quarter, up 230 basis points to 42.6% this year from 40.3% in last year's third quarter. The improvement resulted from increased full-price selling and a reduced level of promotional activity. For the nine month period, the gross margin rate was 41.1% in the current year versus 36.6% in the prior year, a 450 basis point improvement.
Managing Selling, General, and Administrative expenses ("SG&A") continues to be a priority, although, as expected, the Company experienced deleverage for the quarter. As previously disclosed, the Company realized a reduction in proprietary credit card income primarily related to previously announced term changes with HSBC (equating to approximately $2.0 million and $5.0 million in the third quarter and nine months, respectively), and the Company is making targeted investment spending to support growth in such areas as Saks Direct.
In addition, year-over-year incentive compensation expense increased. For the third quarter, as a percent of sales, SG&A expenses were 26.7% this year compared to 25.7% in the prior year, equating to 100 basis points of deleverage. As expected, the Company experienced modest year-over-year deleverage of 30 basis points for the nine months, with current year SG&A expenses of 26.6% of sales compared to 26.3% in the first nine months of last year.
The Company generated operating income of 4.8% of sales in the current year third quarter compared to 2.5% in the prior year third quarter. For the nine months ended October 30, 2010, excluding the aforementioned lease termination costs, severance, and other store closing costs, the Company's operating margin was 2.9% of sales, an improvement over an operating loss of 2.7% in the prior year nine month period.
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The Company generated year-over-year gross margin rate improvement in the third quarter, up 230 basis points to 42.6% this year from 40.3% in last year's third quarter. The improvement resulted from increased full-price selling and a reduced level of promotional activity. For the nine month period, the gross margin rate was 41.1% in the current year versus 36.6% in the prior year, a 450 basis point improvement.
Managing Selling, General, and Administrative expenses ("SG&A") continues to be a priority, although, as expected, the Company experienced deleverage for the quarter. As previously disclosed, the Company realized a reduction in proprietary credit card income primarily related to previously announced term changes with HSBC (equating to approximately $2.0 million and $5.0 million in the third quarter and nine months, respectively), and the Company is making targeted investment spending to support growth in such areas as Saks Direct.
In addition, year-over-year incentive compensation expense increased. For the third quarter, as a percent of sales, SG&A expenses were 26.7% this year compared to 25.7% in the prior year, equating to 100 basis points of deleverage. As expected, the Company experienced modest year-over-year deleverage of 30 basis points for the nine months, with current year SG&A expenses of 26.6% of sales compared to 26.3% in the first nine months of last year.
The Company generated operating income of 4.8% of sales in the current year third quarter compared to 2.5% in the prior year third quarter. For the nine months ended October 30, 2010, excluding the aforementioned lease termination costs, severance, and other store closing costs, the Company's operating margin was 2.9% of sales, an improvement over an operating loss of 2.7% in the prior year nine month period.
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Saks Incorporated
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