Saks: down $26M in Q2

By Don Hogsett -- Home Textiles Today, 8/25/2003 12:00:00 AM

BIRMINGHAM, AL —

With margins thinning out in a promotional environment, costs climbing higher and same-store sales slipping, department store retailer Saks Inc. recorded a sharply widening second-quarter loss of $25.8 million, deeper by more than a fourth than a year-ago deficit of $20.4 million.

Sales at the retailer — parent of Saks Fifth Ave as well as Proffitt's, Younkers and Carson Pirie Scott — were virtually flat at $1.2 billion. But same-store sales dipped by 0.6 percent as weakening comps at the department store group, down 1.7 percent, offset a 1.0 percent increase at Saks Fifth Ave.

Taking a bite out of the bottom line, average gross margin thinned under markdown pressure, declining by 20 basis points, or two-tenths of a percentage point, to 36.5 percent from 36.7 percent a year ago. Adding another layer of pressure, costs jumped up by about $10 million, or 3.1 percent, to $327.3 million from $317.5 million last year. The extra $10 million in operating costs, the retailer said, stemmed from a $16 million reduction in credit contribution after the retailer sold its credit card business to Household International. Excluding the credit contribution, the retailer said, costs actually dropped from year-before levels.

Acting as an offset to some of the operating weakness, the retailer posted a gain of $2.7 million tied to the sale of closed stores. In a further boost to the bottom line, Saks recorded an income-tax credit of $14.8 million resulting from earlier losses.

Sales in the department store group slipped by 0.6 percent in the second quarter, to $750.8 million from $755.4 million last year, but operating profits, under markdown pressure, tumbled by 30.5 percent. Saks Fifth Avenue posted a widening loss of $22.1 million from $13.8 million last year, even though sales improved slightly, rising by 0.9 percent to $486.3 million.

Saks Inc.

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