NEW YORK – Strong increases in fourth-quarter sales and margins, and the reversal of a year-ago loss, impressed investors with their eyes on the post-department-store version of Saks Inc.
For the 14 weeks ended Feb. 3, net income was $21.5 million, or 14 cents a diluted share, versus a loss of $2.2 million, or 2 cents, in the 13-week year-ago quarter. Excluded discontinued operations, the year-ago loss was 22 cents a diluted share.
Excluding an array of special items, including disposal costs for its former department stores, the New York-based upscale retailer had diluted EPS of 39 cents during the quarter, well ahead of the 22 cents expected, on average, by analysts. Gross margin was up to 37.9% of sales from 33.6% in the prior-year period.
The strong performance helped propel shares of Saks ahead $1.08, or 5.8%, to finish the New York Stock Exchange trading session Wednesday at $19.82. Volume was just under 6.7 million shares, three times the daily average.
Net sales were up 16.8% during the quarter, to $955 million from $817.8 million. Same-store sales were up 9.9%. Steve Sadove, chief executive officer, noted that the increase and a 430-basis-point improvement in gross margin “indicate that we have made much progress on understanding our core customer by market and on refining our merchandise assortments in each of our stores. Our sell-throughs of full-priced merchandise have improved significantly and our customer service, clienteling and marketing efforts continue to improve.”
He said that traffic, number of transactions and average ticket trends all improved, and that sales trends were strong across all merchandise categories and in all geographic areas.
Sadove said that Saks seeks to reach an 8% operating margin within three years. That margin is expected to “approach” 4% in 2007 based on same-store sales growth in the low-double digits in the spring and mid- to high-single digits in the fall, “modest” gross margin improvement and other targets and expectations.
Including gains from discontinued operations, net income was $53.7 million, or 40 cents, more than twice the $22.3 million, or 16 cents. Sales were up 5.8% to $2.94 billion from $2.78 billion and rose 4.9% on a same-store basis. Gross margin for the year was 38.6% versus 36.8% in 2005.