Luxury retail chain Saks Inc. (SKS) on Tuesday reported a 13 percent increase in profit for the first quarter on higher comparable store sales and an improvement in gross margins. Adjusted earnings per share beat analysts' estimates, while revenues missed their estimates.
Looking ahead, Saks expects comparable-store sales growth in the mid-single digit range for both the second quarter and the second half of the fiscal year.
However, the company anticipates some incremental markdown pressure in the second quarter as it clears inventory and move through the normal clearance period.
New York-based Saks has benefited from a rebound in demand for luxury items amid an improvement in consumer sentiment.
Comparable store sales rose 4.8 percent in the quarter, compared to a 10.2 percent increase in the same period last year. Comparable-store sales or comps is a key retail industry performance metric to gauge activity at store locations that have been open for at least a year.
Stephen Sadove, Chairman and Chief Executive Officer of Saks, said, "We continued to make solid progress during the first quarter. Our year-over-year earnings improvement was driven by a 4.8% comparable store sales increase, on top of a 10.2% comparable store sales increase in last year's first quarter, and continued gross margin rate improvement."
Sakes said that several merchandise categories showed strength during the first quarter. These include women's WEAR NOW and contemporary apparel, dresses, women's shoes, and men's contemporary apparel, shoes, and accessories.
Gross margin for the quarter improved 30 basis points from last year to 44.4 percent, primarily resulting from increased full-price selling.
Saks' first-quarter net income was $32.15 million or $0.18 per share, up from $28.41 million or $0.16 per share in the year-ago period.
Excluding one-time items, adjusted earnings rose to $32.7 million or $0.19 per share from $30.5 million or $0.17 per share in the prior-year period. On average, eleven analysts polled by Thomson Reuters expected the company to earn $0.18 per share.
Net sales for the quarter grew 3.8 percent to $753.61 million from $726.00 million in the year-ago period, but missed analysts' consensus estimate of $764.35 million.
Saks noted that sales growth was strong in the quarter, but not as robust as in prior quarters, as certain areas experienced a deceleration in sales. Some categories within the women's ready-to-wear zone, such as women's designer apparel, did not meet the company's sales expectations.
Consequently, the company anticipates some incremental markdown pressure in the second quarter.
SKS closed Monday's trading at $10.05, down $0.21 on a volume of 3.36 million shares.
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