(Adds company and analyst comments)
ATLANTA May 20 Upscale retailer Saks Inc
SKS.N reported lower-than-expected quarterly profit on
Tuesday as markdowns pressured gross margin, and its shares
sank 8 percent.
Earnings rose to $18.3 million, or 13 cents a share, for
the fiscal first quarter ended May 3, from $11 million, or 7
cents a share, a year earlier.
Analysts had expected 17 cents a share, according to
The operator of Saks Fifth Avenue stores said sales rose 9
percent to $862.4 million as consumers responded to promotions.
Sales at stores open at least a year, or same-store sales, rose
But gross margin contracted to 38.2 percent from 41.1
percent a year earlier, hurt by increased promotional activity
and clearance markdowns.
"With inventory levels now in line with sales trends, and
Saks focusing its merchandising on its most productive brands,
we look for gross margins to improve over the balance of the
year," retail analyst Jason Asaeda of Standard & Poor's Equity
Research said in a note.
Saks is renovating stores and expanding commission programs
for its workers to boost results. All retailers face a
challenging environment as higher gasoline and fuel prices lead
consumers to curb spending.
Saks Chairman Steve Sadove said higher-end consumers who
crave designer brands were still willing to spend, while
lower-end buyers were more pressured.
"What we call our Diamond and Platinum customers continue
to purchase at the higher rate than the more aspirational
entry-price-point customer," Sadove said during a conference
Those aspirational consumers represent 15 percent to 20
percent of Saks' total customer base, he added.
Saks shares were down $1.13, or 8 percent, to $13.00 in
afternoon New York Stock Exchange trading. The stock has fallen
about 42 percent in the past year.
(Reporting by Karen Jacobs; editing by John Wallace)