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|Saks Incorporated Announces Results for the Fourth Quarter and Fiscal Year Ended January 29, 2011|
- Company provides outlook for 2011 -
NEW YORK, Feb 23, 2011 (BUSINESS WIRE) --
Retailer Saks Incorporated (NYSE: SKS) ("Saks" or the "Company") today announced results for the fourth quarter and fiscal year ended January 29, 2011.
Overview of Results for the Fourth Quarter Ended January 29, 2011
For the fourth quarter ended January 29, 2011, the Company posted net income of $25.0 million, or $.14 per share. The results included an after-tax gain of $3.4 million, or $.01 per share, comprised of:
Excluding this net gain, the Company would have recorded net income of $21.6 million, or $.13 per share, for the fourth quarter ended January 29, 2011.
For the prior year fourth quarter ended January 30, 2010, the Company posted a net loss of $4.6 million, or $.03 per share. Those results included the following after-tax items totaling $14.8 million, or $.09 per share:
Excluding these items, the Company would have recorded net income from continuing operations of $10.2 million, or $.06 per share, for the prior year fourth quarter ended January 30, 2010.
Overview of Results for the Fiscal Year Ended January 29, 2011
For the fiscal year ended January 29, 2011, the Company posted net income of $47.8 million, or $.30 per share. The results included an after-tax gain of $17.2 million, or $.11 per share, comprised of the following items:
Excluding this net gain, the Company would have recorded net income of $30.6 million, or $.19 per share, for the fiscal year ended January 29, 2011.
For the fiscal year ended January 30, 2010, the Company posted a net loss of $57.9 million, or $.40 per share. Those results included the following after-tax items totaling $10.4 million, or $.07 per share:
Excluding these items, the Company would have recorded a net loss of $47.5 million, or $.33 per share, for the prior fiscal year ended January 30, 2010.
Comments on the Fourth Quarter and Fiscal Year Ended January 29, 2011
Stephen I. Sadove, Chairman and Chief Executive Officer of the Company, noted, "I am very pleased with our fourth quarter and full year operating performance. The meaningful year-over-year improvement resulted from comparable store sales increases and gross margin rate expansion. Our team executed very well during the year as we strategically moved from defense to offense."
"We achieved comparable store sales increases in each month of 2010, with our strongest performance in the fourth quarter," Sadove commented. Comparable store sales rose 8.4% in the fourth quarter, exceeding the Company's expectations. For the full fiscal year, comparable store sales increased 6.4%.
In the Saks Fifth Avenue stores, several merchandise categories showed relative strength during the fourth quarter, including women's and men's apparel, handbags, and shoes. For the quarter, the sales increase in the New York City flagship store was modestly below the Company's aggregate comparable store sales performance.
Saks Direct posted an approximate 36% comparable store sales increase in the quarter and an approximate 28% increase for the fiscal year. OFF 5TH's comparable store sales performance was below the Company's aggregate comparable store sales performance for both the fourth quarter and the year.
The Company generated year-over-year gross margin rate improvement in the fourth quarter, up 130 basis points to 37.8% this year from 36.5% in last year's fourth quarter. For the year, the gross margin rate was 40.1% in the current fiscal year versus 36.6% in the prior year, a 350 basis point improvement. The improvement exceeded management's expectations and resulted from increased full-price selling and a reduced level of promotional activity.
Managing Selling, General, and Administrative expenses ("SG&A") continues to be a key priority. For the fourth quarter (excluding certain items), the Company achieved modest leverage. As a percent of sales, SG&A expenses were 23.4% this year compared to 23.5% in the prior year. This leverage was achieved in spite of incurring planned incremental expenses to support the growth in Saks Direct as well as an increase in workers' compensation expense during the quarter. In addition, the Company's year-over-year proprietary credit card income was lower primarily due to previously announced term changes with HSBC; this income reduction was approximately $0.2 million and $5.2 million in the fourth quarter and fiscal year, respectively. For the full year, as expected, the Company experienced modest year-over-year deleverage of 20 basis points, with current year SG&A expenses totaling 25.6% of sales in the current year compared to 25.4% last year.
The Company generated operating income (excluding certain items) of 5.9% of sales in the current year fourth quarter compared to 3.6% in the prior year fourth quarter. For the fiscal year ended January 29, 2011, the Company's operating margin was 3.9% of sales, an improvement over an operating loss of 0.8% in the prior year.
Sadove noted, "2010 was a year of good progress for Saks. We returned to prudently and profitably growing the business while making investments for the longer term. Some of the 2010 accomplishments we are most proud of include:
Balance Sheet Highlights
Consolidated inventories at January 29, 2011 totaled $671.4 million, a 3.4% increase over the prior year. Inventories increased 5.8% on a comparable stores basis.
At fiscal year end, the Company had approximately $197.9 million of cash on hand and no direct outstanding borrowings on its revolving credit facility.
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 January 29, 2011, $27.4 million of the $230 million 2.0% convertible notes balance and $15.2 million of the $120 million 7.5% convertible notes balance were classified in equity.
Funded debt (including capitalized leases, senior notes, and the debt and equity components of the convertible debentures) at January 29, 2011 totaled approximately $549.3million, and debt-to-capitalization was 32.9% (without giving effect to cash on hand).
Net capital spending for the fourth quarter and fiscal year ended January 29, 2011 totaled approximately $18.9 million and $48.4 million, respectively.
Outlook for and Approach to 2011
Sadove noted, "With improvement in the financial markets, we experienced a more stable and predictable operating environment in 2010. We are cautiously optimistic about the overall tone of business and the way our customers are responding to our initiatives. As we move into 2011, we remain committed to our core strategies. We will continue to take balanced risks, making key targeted investments in inventory and infrastructure where we believe the biggest opportunities are to drive sales and profit growth. All of our strategies and initiatives are focused on the customer and on providing a personalized, distinct, and differentiated shopping experience. Some specific areas of focus for 2011 will be:
The Company's assumptions for 2011 are outlined below. Variation from the sales trends, up or down, could materially impact the other assumptions listed.
Sadove concluded, "Our team is very focused on the future and is committed to the innovation, creativity, and superb execution of our strategies necessary to achieve our long-term financial and operating goals and to further 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 fourth quarter and fiscal year ended January 29, 2011 compared to last year's fourth quarter and fiscal year ended January 30, 2010 were:
Leased department commissions included in the total sales numbers above were as follows (sales in millions):
The Company discontinued the operations of its Club Libby Lu ("CLL") specialty store business in January 2009, and the operating performance of CLL is presented as "discontinued operations" in the current and prior year periods.
For the fourth quarter ended January 29, 2011, the Company's two convertible debt instruments were dilutive; therefore, the applicable shares (approximately 40.9 million) were added to the weighted average shares outstanding and the applicable after-tax interest expense (approximately $4.0 million) was added to net income for the fully diluted earnings per share calculation.
Conference Call Information
Management has scheduled a conference call at 9:30 a.m. Eastern Time on Wednesday, February 23, 2011 to discuss results for the fourth quarter and fiscal year ended January 29, 2011. To participate, please call (201) 689-8874 (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 (201) 612-7415 (account number 378; conference ID number 362239).
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 47 Saks Fifth Avenue stores, 57 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-looking information 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: the level 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; effective expense 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 viathe 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