CEO says Saks may close a few stores

NEW YORK Tue Mar 23, 2010 2:31pm EDT

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NEW YORK (Reuters) - Saks Inc SKS.N Chief Executive Stephen Sadove raised the possibility of the luxury department store operator closing a handful of underperforming stores as the retailer seeks to lift margins back to 2007 levels.

Sadove, speaking on Tuesday at an investor conference that was broadcast over the Internet, said Saks could eventually close perennially money-losing locations but that any closings "are predicated on whether there is a lease coming due."

"There are a few stores" that meet both criteria, Sadove said.

Sadove said that breaking a lease early is a costly proposition for anchor tenants, which typically pay lower rent to mall operators because they draw a critical mass of shoppers to the site.

Saks issued a statement later on Tuesday saying it was closing its stores at a mall in downtown Portland, Oregon, as part of what Sadove said was Saks' strategy to focus on "our most productive stores."

The company's main store at the mall is set to close by July 31, while its men's store should close in late April.

The company operates 53 Saks Fifth Avenue full-service stores and 55 Off 5th outlet stores in the United States.

Excluding some one-time items, Saks last month reported a surprise quarterly profit on the strength of improving sales over the holidays, and said it expected results to continue improving this year.

Sadove, at the conference, said that Saks' operating margins could rebound to levels last reached in 2007, before the financial crisis and recession sent luxury spending into a tailspin. In 2007, operating margins were about 4 percent.

Sadove also said Saks "was just scratching the surface" of the potential of the Internet and said online sales could double within a few years. The company does not break out the share of sales that come from its saks.com website.

Saks shares were up 2.7 percent in afternoon trading on the New York Stock Exchange, following an upgrade by JP Morgan.

(Reporting by Phil Wahba; Editing by Gunna Dickson and Steve Orlofsky)

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