SALES SHORTFALL HURTS SAKS’ QUARTER NET
Byline: Thomas J. Ryan
NEW YORK — Weak sales and margins stymied fourth-quarter earnings at Saks Inc., but the performance was in line with a revised forecast issued by the company a month ago.
As it made a series of cost-cutting moves, Saks warned on February 17 that fourth-quarter earnings would be about 15 cents below then-current Wall Street estimates because of shortfalls of $40 million in sales and more than 200 basis points in gross margins compared with internal plans.
Saks’ fourth-quarter income, before certain items, reached $141 million, or 98 cents a share, compared with $142.8 million, or 97 cents. Charges in both periods reduced net earnings to $120.5 million, or 84 cents a share, and $96 million, or 65 cents, a year ago. The charges cover merger integration costs, year 2000 systems conversion costs, writedowns of long-lived assets, store closings and early debt retirement.
Sales moved up 3.8 percent to $2 billion, with same-store sales ahead 2.3 percent.
“Our fourth-quarter and 1999 operating results were consistent with our preliminary earnings announced last month,” said R. Brad Martin, chairman and chief executive, in a statement.
Besides Saks Fifth Avenue, the firm operates Proffitt’s, McRae’s, Younkers, Parisian, Herberger’s, Carson Pirie Scott, Bergner’s, Boston Store and Off 5th, as well as the Folio and Bullock & Jones catalogs.
For the full year, Saks earned $239.1 million, or $1.64 a share, before special items, virtually matching levels of $239 million, or $1.63, a year ago. After charges, net profits were $189.6 million, or $1.30 a share, against a $896,000 loss. Sales gained 7.9 percent to $6.4 billion, and grew 2.6 percent on a comp-store basis.
Saks reiterated that it expects earnings to increase between 9 and 11 percent this year before special items, to between $260 million to $265 million, or $1.80 to $1.85 a share. Saks is looking for comp gains between 3 to 3.5 percent, and gross margin improvement of 10 to 20 basis points. The firm plans to spend about $12 million for e-commerce site Saksfifthavenue.com, which will launch in June.
Saks made its forecast last month while announcing that 460 jobs would be slashed by eliminating the home offices of the McRae’s and Herberger’s divisions and shutting down a Herberger’s distribution center in the fall. The restructuring is expected to reduce operating expenses by about $15 million, beginning in 2001.
Shares of Saks rose 1 1/4 to 14 7/16 Tuesday on the New York Stock Exchange.