Saks Inc cautioned on Tuesday that gross margin will fall in the current quarter as it increases price cuts to clear inventory in areas like designer women's clothing, where sales disappointed during the period.

Saks Fifth Avenue's Manhattan store / Photo: David Shankbone

Shares of the high-end retailer fell 4 percent to $9.65 in early trading, even as the company reported first-quarter earnings that beat analyst expectations by a penny as it sold more goods at full price during the quarter.

Saks said that aside from disappointing sales in some women's clothing, it is expanding in areas like shoes, and increasing spending on inventory in those areas.

Saks reported net income rose to $32.1 million, or 18 cents per share, in the first quarter ended April 28, from a year-earlier $28.4 million, or 16 cents per share.

Excluding one-time items, earnings per share were 19 cents, compared with the average analyst estimate of 18 cents, according to Thomson Reuters I/B/E/S.

Same-store sales rose 4.8 percent, while overall sales rose to $753.6 million from $726.0 million a year earlier. Analysts, on average, looked for $762.6 million.

The company expects gross margin to fall 1.00 percentage point to 1.25 percentage points in the second quarter, before rising 0.25 to 0.50 percentage points in the second half of the year.

It also expects same-store sales to rise in the mid-single-digit range in the second quarter and second half of the year.