Saks’ profits up, but revenue disappoints
NEW YORK, USA – SAKS reported a 13 per cent bump in first-quarter profit, but sales came in well below Wall Street expectations.
The New York company said yesterday that it has seen a sales slowdown in women’s designer clothing and expects that extra markdowns will erode profit margins for the current quarter. Shares slid more than three per cent in premarket trading.
Affluent shoppers have been going back to splurging on status goods since late 2009. But the shortfall in sales at Saks, a barometer of luxury spending, could signal that the affluent are feeling queasy amid growing signs of a spring economic slowdown for the third year in a row. Those worries, as well as an escalating debt crisis in Europe, have weakened the stock market in recent weeks.
Saks posted earnings of US$32.1 million ($2.8 billion), or 18 cents per share, compared with US$28.4 million, or 16 cents per share last year.
Excluding costs related to the construction of a new fulfilment centre, Saks would have earned 19 cents per share. That edged out Wall Street expectations by a penny, but investors focused on revenue.
Revenue rose 3.8 per cent to US$753.6 million, short of the US$761.7 million expected by analysts, according to a poll by FactSet. Revenue at stores opened at least a year rose 4.8 per cent for the quarter. The measure is considered a strong indicator of a retailer’s health because it excludes the volatility from stores recently opened or closed.
“Year-over-year first quarter sales growth was solid, but not as robust as in prior quarters,” said Chairman and CEO Stephen Sadove. “While we continue to see overall growth in the business, certain areas experienced a deceleration in sales.”
Sadove noted that, in particular, women’s designer clothes didn’t fare well. Consequently, the company is discounting the merchandise, a move that could trim profit margins in the current quarter.
Shares of Saks Inc fell 35 cents to US$9.70 before the market opened in electronic trading.