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Nov 14, 2012
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Saks sees Sandy limiting holiday sales gains

By
Reuters
Published
Nov 14, 2012

NEW YORK - Saks Inc said on Tuesday it expects sales at stores open at least a year to be flat during the current holiday quarter because of a slow start to November due to Super storm Sandy.

Saks said Sandy affected stores that account for more than half of its sales.

But during the third quarter, Saks sales and profits were hurt by what it called a "modest" spike in promotions, which lowered its gross profit margin by 0.3 point to 43.9 percent of sales.

Discounts could signal shoppers were a bit more hesitant to buy luxury items, forcing the chain to offer bargains to clear shelves for winter items.

"This isn't going gangbusters," Morningstar analyst Paul Swinand, said of luxury sales. He said high-end shoppers were more likely than others to be aware of the potential threat to the U.S. economy from the so-called fiscal cliff. That refers to the possibility of tax cuts not being extended next year, coupled with government spending cuts.

Saks sales rose 3 percent to $713.2 million, below the $726.1 million analysts were expecting, according to Thomson Reuters I/B/E/S. Sales at stores open at least year rose 3.3 percent, below the company's own forecasts.

The department store operator reported net income of $22.6 million, or 14 cents per share, for the fiscal third quarter ended October 27, up from $17.8 million, or 11 cents per share, a year earlier.

Excluding the reversal of federal income tax reserve, Saks earned 12 cents per share, in line with analyst estimates.

Saks cautious holiday quarter echoes muted forecasts in recent weeks from retailers across a wide spectrum.

TJX Cos Inc on Tuesday said it expects same-store sales during the holiday quarter to be flat to up 2 percent, while the midpoint of Michael Kors Holdings Inc's profit forecast for the quarter was below analyst projections.

Ralph Lauren Corp recently cut its full-year sales forecast, while department store operators Kohl's Corp and Macy's Inc each gave holiday quarter profit forecasts that missed analyst expectations.

Saks, which operates 45 department stores and 64 discount stores, said sales gains at its Fifth Avenue flagship store in Manhattan, which generates about one-fifth of sales, were in line with those of its other department stores.

Eleven of those department stores were closed because of Sandy for between a day and a week.

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