|View printer-friendly version|
|Saks Incorporated Announces Results for the First Quarter Ended May 1, 2010|
- Company updates outlook for balance of 2010 -
NEW YORK, May 18, 2010 (BUSINESS WIRE) --Retailer Saks Incorporated (NYSE: SKS) ("Saks" or the "Company") today 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."
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.
Excluding the aforementioned store closing costs, the Company's operating margin expanded to 7.1% in the quarter from 0.4% in the prior year first quarter.
Balance Sheet Highlights
Consolidated inventories at May 1, 2010 totaled $702.1 million, a 9.9% decrease over the prior year. Inventories decreased 10.3% on a comparable stores basis.
At quarter end, the Company had approximately $179.1 million of cash on hand and no direct outstanding borrowings on its $500 million revolving credit agreement.
In accordance with FASB Accounting Standard Codification 470 related to accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) ("ASC 470"), issuers of convertible debt instruments must separately account for the liability and equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. The discounts (the difference between the convertible rate and a nonconvertible borrowing rate on each issuance) on the Company's two series of convertible notes are being accreted to interest expense through the note maturity dates. Accordingly, at May 1, 2010, $33.2 million of the $230 million 2.0% convertible notes balance and $18.4 million of the $120 million 7.5% convertible notes were classified in equity.
Funded debt (including capitalized leases, senior notes, and the debt and equity components of the convertible debentures) at May 1, 2010 totaled approximately $577.2million, and debt-to-capitalization was 35.7% (without giving effect to cash on hand).
Net capital spending for the first quarter ended May 1, 2010 totaled approximately $7.3 million.
Outlook for the Balance of 2010
Sadove noted, "We remain optimistic about the long-term outlook for our Company and for the luxury sector as a whole. While our first quarter results exceeded our expectations, we still believe the overall environment remains uncertain, and we are approaching the remainder of 2010 with continued caution. However, our assumptions for the balance of the year reflect a somewhat stronger forecast than we had at the beginning of the year."
The Company's assumptions for the balance of 2010 are outlined below. Variation from the sales trends, up or down, could materially impact the other assumptions listed.
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."
Total sales numbers below represent owned department sales and leased department commissions for Saks Fifth Avenue stores, OFF 5TH stores, and Saks Direct. Total sales (in millions) for the first quarter ended May 1, 2010 compared to last year's first quarter ended May 2, 2009 were:
Leased department commissions included in the total sales numbers above were as follows (sales in millions):
Conference Call Information
Management has scheduled a conference call at 9:30 a.m. Eastern Time on Tuesday, May 18, 2010 to discuss results for the first quarter. To participate, please call (706) 643-1966 (10 minutes prior to the call). A replay of the call will be available for 48 hours following the live call. The dial-in number for the replay is (706) 645-9291 (conference ID number 48526985).
Interested parties also have the opportunity to listen to the conference call over the Internet by visiting the Investor Relations section of Saks Incorporated's corporate website at http://www.saksincorporated.com/investor_relations.html. To listen to the live call, please go to the address listed at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call, and a transcript will be posted on the Company's web site within 24 to 48 hours.
To be placed on the Company's e-mail notification list for press releases, SEC filings, certain analytical information, and/or upcoming events, please go to www.saksincorporated.com, click on "Investor Relations," click on "e-mail Alerts," and fill out the requested information.
About the Company
The Company currently operates 53 Saks Fifth Avenue stores, 55 OFF 5TH stores, and saks.com.
The information contained in this press release that addresses future results or expectations is considered "forward-looking" information within the definition of the Federal securities laws.Forward-lookinginformation in this document can be identified through the use of words such as "may," "will," "intend," "plan," "project," "expect," "anticipate," "should," "would," "believe," "estimate," "contemplate," "possible," and "point." The forward-looking information is premised on many factors, some of which are outlined below.Actual consolidated results might differ materially from projected forward-looking information.
The forward-looking information and statements are or may be based on a series of projections and estimates and involve risks and uncertainties.These risks and uncertainties include such factors as: thelevel of consumer spending for luxury apparel and other merchandise carried by the Company and its ability to respond quickly to consumer trends; macroeconomic conditions and their effect on consumer spending; the Company's ability to secure adequate financing; adequate and stable sources of merchandise; the competitive pricing environment within the retail sector; the effectiveness of planned advertising, marketing, and promotional campaigns; favorable customer response to relationship marketing efforts of proprietary credit card loyalty programs; appropriate inventory management; effectiveexpense control; successful operation of the Company's proprietary credit card strategic alliance with HSBC Bank Nevada, N.A.; geo-political risks; the performance of the financial markets; changes in interest rates; and fluctuations in foreign currency and exchange rates.For additional information regarding these and other risk factors, please refer to the Company's filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended January 30, 2010, its Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-K, which may be accessed via EDGAR through the Internet at www.sec.gov.
The Company undertakes no obligation to correct or update any forward-looking statements, whether as a result of new information, future events, or otherwise.
SOURCE: Saks Incorporated