Smaller Saks Struggles for Sizzle
By Don Hogsett -- Home Textiles Today, 3/6/2006
Birmingham, Ala. —Weighed down by weakness at its flagship Saks Fifth Avenue Stores, Saks Inc. recorded a fourth quarter loss of $2.2 million, compared with a year-before profit of $96.6 million. Operating profit at swank Saks Fifth Ave. was slashed by 86.9%, tumbling to $7.6 million from $58.0 million last year.
Tugging at the bottom line was $56.3 million in goodwill and other charges tied to the earlier sale of the retailer's Proffitt's and McRae's divisions as part of a broad sell-off of its department store holdings.
There was some good news. With the department store sell-off, sales dropped off by 14.2% during the all-important Christmas quarter, to $1.8 billion from $2.1 billion last year — but the crucial gauge of same-store sales climbed 1.9%. Department stores outpaced S5A in operating profit, down 4.0%, compared with the slide of almost 90% at Saks Fifth Ave.
The retailer said it plans to pay out a special $4 per share dividend after completing the sale of its northern department store group to Bon Ton Stores for $1.1 billion and a debt assumption of $85 million.
| Qtr. 1/28 (x000) | 2005 | 2004 | % change |
| Sales | $1,772,823 | $2,065,082 | -14.2 |
| Oper. income (EBIT) | 238,448 | 315,950 | -24.5 |
| Net income | (2,242)a | 96,640a | — |
| Per share (diluted) | (0.02) | 0.71 | — |
| Average gross margin | 35.8% | 36.8% | — |
| SG&A expenses | 22.4% | 21.5% | — |
| 12 months | |||
| Sales | 5,953,352 | 6,437,277 | -7.5 |
| Oper. income (EBIT) | 662,146 | 827,159 | -19.9 |
| Net income | 22,348b | 61,085b | -63.4 |
| Per share (diluted) | 0.16 | 0.42 | — |
| Average gross margin | 37.1% | 37.9% | — |
| SG&A expenses | 26.0% | 25.1% | — |
| (loss) a. Fourth quarter results include a $12.9 million asset impairment charge, compared with $2.8 million during the same period last year; a $51.5 million goodwill impairment charge; and a $355,000 loss on the early retirement of debt. b. 12-month results include a $2.1 million asset impairment charge, compared with $12.1 million a year ago; a goodwill impairment charge of $51.5 million; a $29.4 million loss on the early retirement of debt. Prior-year results included a $156.3 million gain on the sale of stores. |
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| Sales – Qtr. 1/28 (x000) | 2005 | 2004 | % change |
| Saks Department Stores | $970,777 | $1,225,192 | -20.8 |
| Saks Fifth Avenue | 802,046 | 839,890 | -4.5 |
| Operating Income – Qtr. 1/28 | 2005 | 2004 | % change |
| Saks Department Stores | 119,431 | 124,461 | -4.0 |
| Saks Fifth Avenue | 7,591 | 58,037 | -86.9 |
