Luxury retailer Saks Inc. is counting on exclusive merchandise and an emphasis on lower prices this year to drive sales increases after reporting a slimmer loss in the fourth quarter, helped by fewer clearance sales.
But the merchant, based in New York, offered a cautious sales outlook amid continued economic uncertainty, sending shares down slightly Wednesday morning.
"Even though the macro environment has stabilized somewhat, we believe that recovery will be fragile," said Stephen Sadove, Saks chairman and CEO, on a conference call following its earnings release. "We have yet to see a meaningful rebound in consumer demand. As we enter 2010, we know the consumers will continue to be discriminating."
In response to shoppers' focus on value, Saks plans to expand its discount store division called Off 5th, Sadove told investors.
Saks said that it lost $4.61 billion, or 3 cents per share, in the quarter that ended Jan. 30. That compares with a loss of $99.74 billion, or 72 cents per share, in last year's fourth quarter.
The latest quarter included several one-time items that weighed down profit by $14.8 million, or 9 cents per share, related to asset impairments and a pension charged associated with layoffs. Excluding those items, the company would have earned 6 cents per share.
Revenue fell 3.4 percent to $811.3 million.
Sales at stores open at least a year fell 4.8 percent. The figure is considered a key measure of a retailer's health because it excludes results at stores that have opened or closed during the year.
Analysts were expecting a loss of 2 cents per share on revenue of $799.1 million.
Sadove said that excluding one-time items, the company was able to post a modest fourth-quarter profit due to substantial improvement in its gross margin and "diligent" expense controls.
Saks and many other luxury retailers were among the hardest hit when the economy went into freefall late in 2008, as affluent shoppers who had been splurging on designer goods pulled back. That resulted in piles of goods that had to be discounted heavily.
But this past holiday season, upscale retailers were prepared for shoppers' new mindset, slashing inventory and working with suppliers to lower prices on designer goods.
Saks said it plans to grab market share this year as it boosts customer service and puts more emphasis on the lowest and mid-tier prices at its stores, moves it started last year.
It also plans to boost its offerings of exclusive merchandise to 20 percent of its business, from the current level of about 10 percent. This spring it's rolling out a new lower-priced trendy line of women's clothing from designer Zac Posen under the Z Spoke brand that will be exclusive at Saks.
Saks said it's seeing its designer customers crossing over to pick up items in lower-priced trendier brands.
The company plans to add three to five Off Fifth stores per year. It's also improving Off 5th's merchandise assortment by focusing less on last season's merchandise and more on products made exclusive for the chain.
However, while Sadove sees more "stability" in its business compared with a year ago, business remains "challenging." As a result, Saks said it expects that sales at stores open a least a year will see a percentage increase in the low to mid-single digits for the full year, compared with a sharp 14.7 percent drop last year.
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