|
RAPAPORT... Saks Inc. reported that sales rose 5.2 percent year on year to $793.2 million for the first quarter that ended on May 4. Same-store sales increased 5.9 percent but the company stated that accounting for the previous 53-week fiscal year in turn distorted figures for the current year, when comparable-stores sales would have increased 4.2 percent sans accounting. The retailer's profit plunged 37.8 percent to $20 million.
The strongest merchandise categories in the first quarter included women’s contemporary and advanced designer apparel, dresses, shoes and handbags; children’s apparel and men’s accessories, shoes and contemporary apparel. Saks flagship store in Manhattan performed modestly below the average, according to the company's filing. 
Saks' inventory increased 7.9 percent year on year to $856.4 million during the first quarter, but the figure was also slightly distorted due to the later quarter ending date. Saks amended its existing revolving credit agreement, increasing the maximum availability from $500 million to $600 million and extending the maturity date to March 28, 2018 from March 29, 2016. In addition, Saks redeemed the balance of its $230 million outstanding principal amount of the 2 percent convertible senior notes due March 15, 2024, using cash on-hand and available under its revolving credit facility.
The first quarter included after-tax items of $10.1 million including $2.3 million related to store closing costs and a $7.8 million non-cash loss on extinguishment of debt related to the company’s redemption of its $230 million, 2 percent convertible senior notes. Saks contended that by excluding those items, it would have reported a profit of $30 million.
Stephen I. Sadove, the CEO of Saks, said that he was pleased with a strong comparable-store sales increase in the first quarter, coupled with a gross margin rate of 44.4 percent, which was the same compared with one year ago.
''We are making strategic long-term investments in infrastructure and technology (Project Evolution) that will enable us to further enhance our omni-channel capabilities. These investments will continue to place pressure on our near-term profitability; however, we are taking the right actions and a long-term approach to the business. We are positioning our company for future revenue and earnings growth,'' Sadove said.
Saks increased its expense outlook for the year, with an additional $5 million to $6 million requirement for Project Evolution and another $5 million to $6 million related to an earlier launch of OFF5TH.com.
Sadove noted, “Project Evolution is key to our omni-channel transformation. It can be difficult to project all expenses associated with a multi-year project of this magnitude. As we have gotten further along in the process, we generally remain on schedule but expect to incur more expenses in 2013 than we initially anticipated. Our expected total capital investment in the project remains unchanged at approximately $85 million to $95 million. We remain absolutely confident that this investment is the right one for the business.
“We are very excited about the launch of OFF5TH.com. As the ecommerce business has evolved, it is clear that an omni-channel opportunity exists for us in the outlet channel. We have accelerated our efforts in this area and believe that OFF5TH.com will position us as an omni-channel retailer in the off-price arena.”
For the balance of 2013, Saks anticipates that comparable-store sales will grow by between 4 percent and 6 percent, inventory levels will increase by between 4 percent and 5 percent, and gross margin will remain flat. The SG&A deleverage for the full fiscal year will be approximately 70 to 80 basis points; however, comparisons for the fourth quarter and full fiscal year will be negatively impacted by the 14-week fourth quarter and the 53-week fiscal year of 2012.
Net capital expenditures of approximately $145 million to $155 million for the full year will include approximately $75 million for Saks Fifth Avenue store renovations, new vendor shops and the purchase of two surface parking lots used by the Beverly Hills, California store. Approximately $55 million relates to Project Evolution and other information technology enhancements and the balance primarily relates to OFF 5TH and maintenance capital.
|