Saks Q1 revenue up; increasingly optimistic about future

18 May '11

5 min read

The Company generated operating income (excluding certain items) of 8.7% of sales in the current year first quarter compared to 7.1% in the prior year first quarter.

Outlook for the Balance of 2011

Sadove noted, "With the rebound in the financial markets, the luxury sector has rebounded as well. We are increasingly optimistic about the future and are pleased that our customers have responded to our differentiated merchandising, service, and marketing initiatives. We continue to be very targeted and strategic in our SG&A spending and in the inventory, infrastructure, and capital expenditure investments we are making."

The Company's assumptions for the balance of 2011 are outlined below. Variation from the sales trends, up or down, could materially impact the other assumptions listed.

• Comparable store sales growth in the high-single digit range for the second quarter and in the mid-to-high single digit range in the second half of the fiscal year.
• Comparable store inventory levels are expected to be up in the mid-single digit range throughout the year.
• Based upon current inventory levels and the Company's promotional calendar and permanent markdown cadence, the Company expects a year-over-year gross margin rate increase of 30 to 50 basis points in both the second quarter and the second half of the fiscal year. The Company's gross margin rate is typically higher in the first half than in the second half of the fiscal year.
• Based on current sales expectations, the Company expects SG&A leverage of 20 to 30 basis points in both the second quarter and the second half of the fiscal year. SG&A dollar increases primarily are expected from incremental variable costs associated with planned sales growth (primarily sales associates' commissions), targeted investment spending to support Saks Direct growth and the Company's multi-channel initiatives, targeted incremental media spending, and an increase in employee benefit expense. Other Operating Expenses (rentals, depreciation, and taxes other than income taxes) are expected to total approximately $75 million for the second quarter of 2011 and approximately $156 million to $158 million for the second half of 2011. Depreciation and amortization, which is included in the above amounts, should total approximately $120 million for the full fiscal year.
• Based on existing debt arrangements, maturities, and interest rates, interest expense should total approximately $13 million for the second quarter of 2011 and approximately $21 million for the second half of 2011.
• An effective tax rate of approximately 40.0% for the year.
•A basic common share count of approximately 157 million and a diluted common share count of approximately 202 million for the full fiscal year. Share counts used in earnings per share calculations are expected to fluctuate by quarter based on income levels, convertible debt, and stock options.
• Net capital expenditures of approximately $70 million to $75 million for the full year.

The Company currently operates 46 Saks Fifth Avenue stores, 57 OFF 5TH stores, and saks.com.

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