Saks

NEW YORK | Tue Nov 16, 2010 - Saks Inc (SKS.N) reported a higher-than-expected quarterly profit, helped by well-heeled shoppers emboldened by this year's Wall Street gains to go splurge, and the retailer forecast more sales growth for the upcoming holidays.

Saks, whose shares fell 1 percent in morning trading amid a broader market drop, said sales at stores open at least a year, or same-store sales, rose 5.7 percent in the third quarter. It expects gains in the "mid-single-digit range" on a percentage basis in the fourth quarter.

Chief Executive Steve Sadove has often tied the fortunes of the retailer to how well the stock markets are faring, noting that even affluent shoppers hold back on luxury if they feel their personal wealth is at risk. The S&P 500 index is up 22.8 percent since July.

"We feel much better about the overall tone of business and the way our customers are responding to our initiatives," Sadove said, but warned that the economic recovery remains tentative.

Its flagship store on Manhattan's Fifth Avenue, which accounts for about 10 percent of chainwide sales, produced sales in lines with the company's overall performance, boosted by spending by tourists and Wall Streeters.

At the other end of the retail spectrum, improving U.S. consumer sentiment also spurred Wal-Mart Stores Inc (WMT.N) to forecast same-store sales would be rise during the U.S. holidays.

Similarly, Saks' upscale rival Nordstrom Inc (JWN.N) on Monday forecast full year same-store sales performance that implied healthy gains during the holidays.

The department store chain reported a third-quarter profit of $36.3 million, or 20 cents per share, up from the $6.3 million, or 4 cents a share, of a year earlier.

Excluding one-time items, profit was 6 cents per share for the quarter, ended October 30. On average, analysts expected 3 cents, according to Thomson Reuters I/B/E/S.

Net sales rose 4.3 percent to $658.8 million, topping Wall Street expectations for $656 million.

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The sales growth has come despite Saks' efforts to pare weak-performing stores. It has closed six department stores this year, leaving it with 47, while opening more of its Off 5th clearance stores. It now operates 56 of those outlets.

Sadove said on a call with analysts he expects "at most very few" additional department store closings.

Gross profit margin, which reflects how much profit is generated directly from sales, rose 2.3 percentage points to 42.6 percent in the third quarter as Saks kept inventories in line with same-store sales gains and reduced discounting.

Saks has been weaning shoppers off of discounts ever since it slashed prices in a near panic when the U.S. financial crisis sent luxury shoppers out the doors in 2008.