US: Saks books "solid" Q1 profit, sees slowing sales
- Q1 earnings jump 13% to $32.1m
- Revenues rose 3.8% to $753.6m
- Gross margin up 30 basis points to 44.4%
Luxury retailer Saks Incorporated today (15 May) said it made "solid progress" in its first quarter with a 13% jump in earnings, but added that slowing sales in areas like women's designer wear are weighing on profit margins.
"Our year-over-year earnings improvement was driven by a 4.8% comparable store sales increase, on top of a 10.2% comparable store sales increase in last year's first quarter, and continued gross margin rate improvement," noted chairman and CEO Stephen Sadove.
"While we continue to see overall growth in the business, certain areas experienced a deceleration in sales. Specifically, some categories within the women's ready-to-wear zone (such as women's designer apparel) did not meet our sales expectations, and consequently, we anticipate some incremental markdown pressure in the second quarter as we clear inventory and move through the normal clearance period.
"Additionally, we continue to experience meaningful sales growth in certain areas such as shoes, which is being driven by our strategic increase in the breadth and depth of our inventory assortments in these merchandise categories.
"As expected, these incremental investments are negatively affecting our gross margin rate."
The New York based company, which operates the Saks Fifth Avenue and Saks Off 5th stores, posted earnings of $32.1m or $0.18 per share, in the three months to 28 April. This compares with $28.4m or $0.16 per share last year.
Excluding costs relating to a new fulfilment centre and store closure, Saks would have earned $32.7m, or $0.19 per share, it said.
Revenues rose 3.8% to $753.6m - and a rise in full-price selling lifted gross margin rate by 30 basis points to 44.4%, up from 44.1% in last year's quarter.
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