NEW YORK — Saks Inc. swallowed a big loss in its second quarter, although the Saks Fifth Avenue division saw a small sales gain as well as operational improvements.
Saks Inc. on Tuesday reported a net loss of $51.9 million, or 38 cents per share for the quarter ended July 29, with roughly a third of the loss attributed to various special charges. The charges included $12.8 million, or 9 cents a share, from accounting and options changes related to a $4 per share special dividend; $1.1 million from asset impairments and dispositions; nearly $1 million in legal costs from the previously disclosed government investigations into Saks' markdown and accounting practices, and $3.6 million from severances and retention bonuses.
Last year's second-quarter net income of $8.2 million, or 6 cents a share, is not directly comparable, because the company was boosted by a $77.8 million gain on discontinued operations involving the sale of the Proffitt's and McRae's chains to Belk Inc., a gain that was partially offset by a $18.8 million loss from debt reduction.
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, and executives cited progress in the Saks Fifth Avenue turnaround effort as a contributor.
SFA's operating loss narrowed to $33.3 million from $42.8 million in the year-ago period. There was a 3.4 percent comp-store gain at SFA in the second quarter, though gross margins were flat against last year. SFA's total sales in the quarter, including those at the 50 Off 5th outlets and saks.com, came to $591.6 million versus $589.6 million a year ago.
Total Saks Inc. sales — including Parisian, which is being sold to Belk for $285 million, and Club Libby Lu — came to $760.7 million versus $1.21 billion last year, reducing the bottom line. The year-ago figure included revenues from the Northern Department Store Group, which was sold to Bon-Ton in March.
Some proceeds from the department store sales have been used to pay the $4 dividend, for a total of $547 million; to buy back nearly $225 million in common stock, and to cut debt by more than $600 million.The corporation has been able to intensify remerchandising and cost-cutting efforts at SFA, following the sell-offs over the past year of its regional department stores, most recently Parisian.
"We are making definite progress at SFAE," said Saks Inc. chief executive Steve Sadove, in a statement. "I am pleased with the sales performance and expense control demonstrated during the quarter. We expect to see improved operating results at SFAE in fall 2006 and even more improvement in 2007. We are working to ensure that our merchandise assortments are appropriate by market, and sales of early fall merchandise receipts are encouraging. We are also focused on improving our gross margin rate performance through improved inventory management, further reducing our operating expenses, and spending capital in a disciplined manner with a focus on return on investment."
Later, during a conference call, Sadove said vendor support for the 54-unit SFA was growing. "It's not about allowances," he said. "It's about having the right product that the consumer wants and getting the sell-throughs. Allowances are something you'd look at if you're not successful."
Aside from working with vendors better, he said, buyers are collaborating more effectively with store personnel and planners. "I think there has been a cultural evolution within Saks Fifth Avenue," Sadove said. "And so I'm seeing every day indications of moving in the right direction, but it's always two steps forward and one step back. Are we on our own 30-yard line? Probably something like that."
Sadove also upped the outlook on SFA's 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. The inventory buildup, which Sadove described as being at an "appropriate level," is largely in basics, accessories, core designer businesses such as Gucci, Prada and Chanel, footwear, particularly Stuart Weitzman and Christian Louboutin, private label and petites. The remerchandising, geared to appeal to a broader audience while fine-tuning assortments at each store to better meet local demands, should be in shape by next spring, Sadove said.
In other positive signs, SG&A expenses declined approximately 9 percent, with better payroll management and less legal expense, Sadove noted.In the second quarter, Parisian, along with the Club Libby Lu specialty chain, generated an operating loss of $1 million compared with an operating loss of $900,000 last year. Comp sales rose 1 percent.
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye