Saks staggers under expense load

Saks Inc. continued to struggle with its numbers in the third quarter. The retail company saw its expenses balloon as a percentage of sales, and posted a drop in its operating profit of 2.9 percent, to $182 million.

The company reported net income of nearly $12.4 million for the quarter, but this included a benefit from income taxes of $10.4 million as opposed to a provision of $1.2 million in the third quarter of 2002. Without these items, Saks' net dropped by more than 36 percent for this year's third quarter, to slightly less than $2 million.

Brad Martin, chairman and ceo, said the jump in the SG&A statistic reflected expenses associated with increased sales in existing and new stores, a reduction in the private-label credit card contribution and charges related to settling lease liabilities and severance. Inventories also rose at the various Saks stores, with both total and comp inventories rising 3 percent in the third quarter.

On the somewhat brighter side, sales for the Saks group rose 4.3 percent for the third quarter, reaching about $1.5 billion; and same-store sales rose 3.1 percent in the quarter. Leading the way was the Saks Fifth Avenue Enterprises sector, which pushed up sales by 6.4 percent (5 percent on a comp-store basis), to $601.1 million. The Saks Department Store Group saw sales rise by 3 percent overall and 1.8 percent on a same-store basis.

Martin also noted that the company as a whole was able to improve its gross margin percentage by 80 basis points in the quarter. Saks also slimmed down its year-over-year interest expenses by reducing borrowings and taking advantage of lower interest rates.

Saks Inc.

Qtr. 11/1 (x000) 2003 2002 % chg
a: Includes a benefit based on income taxes of $10,392,000 for the third quarter of this year, compared with a provision of $1,154,000 based on income taxes for the third quarter of 2002. With out these benefits and provisions, Saks' third-quarter net income was $1,961,000, down 36.2% from $3,076,000 net income for the 2002 third quarter.
Sales $1,467,147 $1,406,142 4.3
Operating income 181,996 187,455 -2.9
Net income 12,353a 1,922 542.7
Earnings per share 0.09 0.01 800.0
Average gross margin 38.9% 38.1%
SG&A percentage 26.5% 24.8%
Nine months 2003 2002 % chg
Sales 4,086,111 4,069,601 0.4
Operating income 493,342 528,113 -6.6
Net income 1,013 -43,870
Earnings per share 0.01 -0.30
Average gross margin 37.8% 37.6%
SG&A percentage 25.7% 24.7%

Home & Textiles Today Staff | News & Commentary

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