NEW YORK – Saks Inc. swallowed a big loss in its second quarter, though the retailer did show decent sales gains and other operational improvements at the Saks Fifth Avenue division.
The net loss was $51.9 million, or $.38 per share for the quarter ended July 29, 2006, compared to net income of $8.2 million, or $.06, in the year ago quarter. However, the year ago results included a $77.8 million gain on discontinued operations involving the sale of the Proffitts and McRae’s chains to Belk, which was partially offset by a loss of $18.8 million from debt reduction.
Part of the latest quarter’s net loss stemmed from charges including $12.8 million, or $.09 per share, from accounting and options changes related to a $4 per share dividend. There was also $1.1 million, or $.01, in charges from asset impairments and dispositions and nearly $1 million in legal costs from the previously-disclosed Securities and Exchange Commission investigation into Saks’ markdown and accounting practices.
On an apples-to-apples basis, stripping away the various special charges and gains, Saks Inc. reduced its operating loss to $38 million in the second quarter, from $50.8 million in the year ago period. Help came from Saks Fifth Avenue, where the operating loss narrowed to $33.3 million, from $42.8 million in the year ago period, a 22 percent improvement. There was also a 3.4 percent comp-store gain at the SFA specialty chain in the second quarter, though gross margins were flat against last year’s.
The corporation has been able to intensify turnaround efforts at SFA, following the sell offs of its northern and southern department store groups and its Parisian chain.During a conference call Tuesday, Steve Sadove, Saks Inc. chief executive officer, expressed confidence in SFA, saying that vendor support was growing. He also upped the outlook on comp-store gains in the second half to mid-single digits, from low-to-mid-single digits and said inventories are currently up 4 percent, reversing a pattern of trimming inventories over the last four quarters.SFA’s sales in the quarter came to $591.6 million versus $589.6 a year ago.
Total Saks Inc. sales, including Parisian which is being sold to Belk Inc. for $285 million, and Club Libby Lu, came to $760.7 million versus $1,214.5 million. The year-ago figure includes revenues from the northern department store group which was sold to Bon-Ton.
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