By  on November 16, 2005

NEW YORK — Amid one of the biggest strategic transitions in its history, Saks Inc. delivered strong operating results for the third quarter, reversing a year-ago operating loss, on sales that declined 11.2 percent.

The retailer, which recently sold its Proffitt's/McRae's business for $623 million to Belk and announced the sale of its northern department store group to Bon-Ton for $1.2 billion, also said Tuesday that it had changed its mind about selling Club Libby Lu and will keep it.

R. Brad Martin, chairman and chief executive officer of Saks, said during a conference call with investors that the retailer would continue operating the store-in-store locations of Club Libby Lu, "but going forward, we'll focus on growth via the stand-alone business model."

"We believe there are new unit growth opportunities for this exciting, unique and productive specialty store concept," Martin said.

Commenting on the sale of Saks' department store businesses, Martin offered music to shareholders' ears: "With our strong balance sheet and our expectations for the future improved performance of the [Saks Fifth Avenue Enterprises] and Parisian businesses, we currently believe that it will be appropriate to distribute a substantial portion of the proceeds from the [northern department store group] transaction to our shareholders," Martin said in a statement.

For the quarter ended Oct. 29, operating income was $15.6 million, which compares with an operating loss of $15.9 million in the same period last year. Sales during the quarter fell to $1.32 billion from $1.48 billion. Net income was $225,000, or zero cents per share, which compares with a loss of $30.4 million, or 22 cents, in the same period last year.

Bottom-line results include a variety of awards and charges, such as a $10.5 million gain earmarked for the insurance settlement of its storm-damaged SFA store in New Orleans. This was offset by a $4.5 million asset impairment charge and other costs relating to the sale of Proffitt's/McRae's. Other charges included a $4.6 million legal bill for the investigation into improperly collected markdowns at SFA as well as for the ongoing investigation by the Securities and Exchange Commission and the U.S. attorney into those practices.

Steve Sadove, vice chairman and chief operating officer, said during the conference call that Saks Department Store Group posted a total sales decline of 19.6 percent to $680.6 million as comparable-store sales rose 0.1 percent. SDSG's operating income rose $9.5 million in the quarter, to $13.3 million."Parisian generated improved operating performance for the period resulting from a low, single-digit comp-store sales increase, gross profit margin improvement and careful expense management," Sadove said. "There's more work to be done to create long-term value, but we believe this business has an exciting future and that we can continue to improve those operating margins."

At SFAE, total sales were flat at $634.5 million, but comps showed a 5.4 percent gain. Carving out the expenses related to the markdown investigations and other charges, SFAE's operating income "would have totalled approximately $31.8 million, or a $10.4 million improvement over the prior year," said Fred Wilson, chairman and chief executive officer of SFAE. Wilson said SFAE's "target growth areas" during the quarter included contemporary and designer apparel, shoes and handbags.

To Read the Full Article

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus