Saks sees strong 4Q profits

BIRMINGHAM, AL — Building margins and cutting costs, Saks Inc. pushed fourth-quarter profits up by 26.2 percent, to $68.1 million from $54.0 million last year, overcoming a modest decline in sales.

Sales at the diversified retailer — including Saks Fifth Avenue, Proffitt's, McRae's, Younkers' and Carson Pirie Scott — dipped by 3.7 percent, to $1.8 billion from $1.9 billion. Same-stores fell 3.7 percent.

Sales fell at both the department store group and Saks Fifth Avenue during the Christmas quarter, but the decline was greater at the luxury retail outlet. Department store sales declined by 2.3 percent, to $1.2 billion, and same-store sales were off by 3.4 percent. But, the shortfall was even more pronounced at Saks Fifth Avenue, where total sales declined by 5.9 percent, to $682.0 million, and same-store sales declined by 4.1 percent.

But, it was Saks Fifth Avenue, the upstairs retailer, that drove the bottom line improvement as it bounded back from weakness the year before. Roaring back from last year's softness, operating profits at Saks Fifth Avenue jumped to $53.1 million from $10.7 million last year. But with sales easing off in a promotional holiday season, operating profits at the department store group declined by 19.0 percent, to $118.2 million from $145.9 million last year.

In a lift to the bottom line, the combined retail operation widened its margins substantially, by 200 basis points, or 2.0 percentage points, to 35.6 percent from 33.6 percent last year. Despite the lower sales rate, gross margin dollars improved by 1.8 percent, to $654.9 million from $643.2 million, dropping $19.9 million down to the bottom line.

In another big lift, the retailer slashed its overhead. Measured as a percentage of lower sales, operating costs improved by 30 basis points, to 18.6 percent from 18.9 percent a year ago. But measured in absolute dollars, costs were pared by 5.5 percent, to $342.7 million from $362.2 million, generating a cash savings of $19.9 million.