U.S. Markets closed

Saks Posts Flat 1Q Earnings

Zacks Equity Research

Saks Incorporated (SKS) reported first-quarter 2013 earnings of 19 cents per share (excluding after-tax charges of $10.1 million or 6 cents per share). The results were consistent with the year-ago level due to a modest same-store sales growth and a steady gross margin rate. Earnings were also in line with the Zacks Consensus Estimate.

Revenues and Margins

Net sales for the quarter rose 5.3% year over year to $793.2 million  excluding the extra week in 2013, mainly on account of a solid 4.2% increase in same-store sales. Quarterly revenues also came well above the Zacks Consensus Estimate of $779.0 million.

The company's stores and operations comprise Saks Fifth Avenue (these are principally free-standing stores in exclusive shopping destinations or anchor stores in upscale regional malls), Saks Fifth Avenue OFF 5th (these stores primarily target value-conscious customers) and Saks Fifth Avenue e-commerce operations known as Saks Direct.

During the quarter, the company's stores witnessed strong sales growth, particularly in women's and men's contemporary apparel and advanced designer apparel; dresses; women’s shoes; handbags; children’s apparel; and men’s accessories, shoes, and contemporary apparel.

Gross margin remained flat at 44.4% compared to the year-ago level as higher sales were offset by higher cost of sales during the quarter. Operating margin declined 160 basis points to 7.0% due to increase in selling, general and administrative expenses and investment in omni channel initiatives.

Other Financial Updates

Saks ended the first quarter with $20.1 million in cash and equivalents, compared with approximately $80.4 million as of Feb 2, 2013. Long-term debt stood at $216.3 million compared with $260.6 million as of Feb 2, 2013. As of May 4, 2013, consolidated inventories were $856.4 million compared with $822.9 million at the end of Feb 2, 2013.

During the quarter, the company repurchased shares worth $250,000 at an average price of $10.52.

Guidance Update

Saks expects same-store sales to grow in the range of 4% to 6% in 2013 instead of the 3% to 5% announced previously. The company expects the gross margin to be relatively flat for the rest of year. Same-store inventory levels are expected to progress in the 4% to 5% range through the year instead of the 3% to 5% range announced previously.

With respect to the current capital structure, Saks expects interest expense of $23 million to $24 million for the year. The company's effective tax rate is expected to be 41.0% for 2013 instead of 40% as expected previously.

Saks anticipates capital expenditure to be in the range of $145 million to $155 million for the full year instead of $140 million to $150 million as anticipated previously.

Saks currently holds a Zacks Rank #3 (Hold). Other stocks in the retail and wholesale sector worth considering include Stein Mart Inc. (SMRT) with a Zacks Rank #1 (Strong Buy), and both The Gap Inc. (GPS) and The Buckle Inc. (BKE) with a Zacks Rank #2 (Buy).

Read the Full Research Report on GPS

Read the Full Research Report on BKE

Read the Full Research Report on SKS

Read the Full Research Report on SMRT

Zacks Investment Research

More From Zacks.com