NEW YORK — Saks Inc.’s luxury business outpaced its department stores unit in the first quarter, though both businesses saw across-the-board declines on the top and bottom lines.

As the divisions went, so did the corporation, which, excluding special items, saw net income fall 42.5 percent to $12.6 million, or 9 cents a share, from $21.9 million, or 15 cents, a year ago.

On the basis of reported results, Saks’ net income was $14.4 million, or 10 cents a diluted share, for the quarter ended May 3. This compared with year-ago losses of $25.4 million, or 17 cents.

The most recent quarter’s after-tax profit was inflated by $1.8 million, or 1 cent, primarily related to a $3.2 million gain on the sale of the firm’s credit card receivables to Household International, which was partially offset by charges related to asset dispositions and consolidation at the Younkers chain. Year-ago charges related to an accounting change tallied at $47.3 million, or 32 cents a share.

Investors traded up shares of the retailer 13 cents, or 1.5 percent, to close Tuesday at $8.77 on the New York Stock Exchange.

Sales for the three months slid 3.1 percent to $1.38 billion from $1.43 billion a year ago, while on a comparable-store basis, sales dipped 3.4 percent. Total inventories were 3.9 percent above year-ago levels at the close of the quarter.

While the Saks Fifth Avenue luxury chain made up just 42.2 percent of the overall company’s sales for the quarter, it generated 70.9 percent of the operating profits. Overall operating income, including the catchall “other” category, dropped 25.3 percent to $46.5 million.

Operating profits at the luxury business sank 6.5 percent to $33 million, while sales fell 4.2 percent to $582.7 million. Comps slid 4.1 percent.

Christina Johnson, president and chief executive officer of the Saks Fifth Avenue business, in a statement, blamed the comp drop on “a continued difficult luxury market and weather conditions in the Northeast, where we are most concentrated. However, a diligent focus on inventory and expense management mitigated the impact of the sales shortfall, leading to a relatively stable operating income year over year.”Chairman and ceo R. Brad Martin, on a conference call with Wall Street, added: “We’re attempting to lower the breakeven level, if you will, on a cost basis and I think you’re seeing some of the benefits of that in the first quarter.

“There will come a point in time when the challenge for us in this business is going to be to get some growth and invest in inventory and marketing activities. We are looking for the moment in time in which we can pull that trigger.”

Martin said Saks Fifth Avenue is also headed toward licensing more space out to vendors: “Directionally, we see more real estate-type orientated transactions. Saks Fifth Avenue has the premium real estate through which to distribute luxury goods within the United States.”

Sales growth in departments with leasing arrangements, he said, beat out the sales advance in other areas of the store.

“What we’re finding is a number of important suppliers who once might have thought they needed a major retail strategy themselves can have elements of that strategy by utilizing our real estate and some of our fixed overhead,” said Martin.

The department store unit, which includes the Parisian and Proffitt’s nameplates, among others, saw operating income retreat 39.4 percent to $24.5 million on a 2.3 percent depression in sales to $799.2 million. Comps were off 2.9 percent.

George Jones, president and ceo of the department store group, said promotional activity increased during the quarter as SDSG “faced a challenging operating environment characterized by weak year-over-year demand and adverse weather conditions in many of our markets.”

He noted, though, that the business furthered its strategic goals by “developing its franchise businesses, growing sales in key item categories, and increasing the overall mix of private brand and other differentiated product in its stores.”

In a statement, Martin noted that trading conditions were uncertain. “There will be continued sales and gross margin rate pressure in the second quarter of 2003,” he said. “We are cautiously optimistic regarding some improvement in sales and operating performance trends in the second half.”

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