By  on November 21, 2007

Saks Inc. posted robust third-quarter earnings on strong same-store sales, with officials confident in a healthy luxury sector for the fourth quarter but, at the same time, acknowledging a "challenging macroenvironment."

During the quarter, profits more than tripled as sales soared 14.2 percent. Results were driven by an 11.4 percent same-store sales increase in the quarter. The bottom line also was bolstered by the fact that the retailer did not record a loss from discontinued operations — as it did in the previous year. Gross margins, however, were flat due to markdowns. Management noted that its online business realized a 40 percent year-over-year gain.

For the quarter ended Nov. 3, net income rose to $21.6 million, or 14 cents a diluted share, from $6.2 million, or 5 cents, in the prior year on sales that climbed to $796.1 million from $697 million.

During a conference call with analysts, management cautioned that the aspirational — or bridge — shopper, who buys luxury goods at opening price points, is pulling back. Late last month, Coach Inc., which serves the aspirational shopper, warned of slowed retail traffic while Polo Ralph Lauren Corp. lowered its earnings outlook earlier this month for similar reasons.

Stephen I. Sadove, chairman and chief executive officer, said results indicate "that our customers are continuing to respond to our strengthened merchandise selections, service initiatives and innovative marketing."

During the call, one analyst asked Sadove to offer specifics in regard to the challenges ahead.

"I think that the environment is getting tougher out there — I still think that the luxury sector is very healthy," Sadove explained. "I think that the consumer is clearly seeing some impact, especially [in] what we would call our 'good zone.' Remember, we are always thinking in luxury terms, but we've looked at it from good, better, best luxury price points. And I think that you are seeing more pressure on that aspirational luxury consumer — that would be our bridge price points. Our entry price points is where you are seeing more of the pressure while the higher-end luxury price points have not seen a slowdown."

Sadove said that overall, the company feels "quite good about where the fourth quarter is, but clearly you've seen some more price competition at the lower end of that spectrum."

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