Belk shows it knows how to earn
December 5, 2006-- Home Textiles Today,
Charlotte, N.C. -- Flying under the radar as a closely held company, and quietly building sales and profits, Belk Inc. leveraged wider margins, lower operating costs and a deep cut in interest costs into a third-quarter profit of $23.1 million, reversing a year-before loss of $4.5 million stemming from hurricane losses and the cost of integrating the Proffitt's and McRae's stores it acquired in 2005.
Buying some stores and selling others, the Southeastern department store chain built sales by 13.3% to $794.3 million from $701.3 million last year. Remarkably, the retailer drove same-store sales up by 7.4%.
Providing a lift to the top line, Belk completed the buyout of 40 Parisian department stores from Saks Inc. on Oct. 2, yielding two months worth of sales from those stores. Then raising some cash, Belk turned around and said it will be selling 11 of those doors, including four to Bon-Ton Stores.
Driving profits higher, in addition to stronger sales, Belk boosted average gross margin by 260 basis points, or 2.6 percentage points, to 32.6% from 30.0% a year ago. At the same time costs were whittled down by 80 basis points, or eight-tenths of a percentage point, to 28.1% of sales from 28.9% a year ago. In a further lift, interest costs were pared by 16.9% to $11.8 million from $14.1 million, yielding a savings of $2.4 million.
In an additional boost to profits, Belk banked $8.8 million on the sale of assets, and earned another $3.3 million on investments.