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By
Reuters
Published
May 17, 2011
Reading time
2 minutes
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Saks profit up on more full-price sales

By
Reuters
Published
May 17, 2011

May 17 - Saks Inc reported a higher quarterly profit as it sold more items at full price, and the luxury department store operator forecast continued sales growth at established stores for the rest of the year.

Saks
Customer entering Saks Fifth Avenue Store

Saks said on Tuesday it expects sales at stores open at least a year, or same-store sales, to rise by a high single-digit percentage rate in the current quarter and a mid-to-high single-digit range in the second half of the fiscal year.

Chief Executive Steve Sadove said "the rebound in the financial markets" had spurred luxury sales.

Saks' upbeat outlook comes as U.S. luxury sales are soaring again. Saks rivals Nordstrom Inc and Neiman Marcus Group reported first-quarter same-store sales gains of 7.8 percent and 9.7 percent, respectively.

Saks slashed prices in a near panic when the luxury sector cratered during the 2008 financial crisis, and it has had to wean shoppers off discounts.

Sadove said Saks' improvement in gross margin, which gauges the profitability of items sold, came primarily from its ability to offer fewer discounts.

Saks closed six department stores in 2010, preferring to focus its new stores on its Off Fifth outlets, which cater to so-called "aspirational shoppers" who love top-name brands but have more modest means than Saks' core customer.

Saks said on Monday it would open four more Off Fifth stores this year. It has also expanded its exclusive merchandise lines since the recession, giving it more ability to charge shoppers what it wants to.

Gross margin rose 1 percentage point to 44.1 percent during the first quarter, which ended on April 30.

Saks said it expects gross margin to rise between 0.3 and 0.5 percentage point this quarter and through the end of the year.

In contrast, gross margin at mid-priced department store chains such as Macy's Inc and J.C Penney Co Inc has little room to rise, given higher cotton prices.

Saks, which operates 46 department stores and 57 Off Fifth outlet stores, reported first-quarter net income of $28.4 million, or 16 cents per share, compared with $18.8 million, or 11 cents per share, a year earlier.

Excluding one-time items, profit was 17 cents per share. Revenue rose 8.7 percent to $726 million.

Saks shares were up 13 cents to $11.40 in premarket trading.

(Reporting by Phil Wahba, editing by Maureen Bavdek and John Wallace)

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