Tags: Saks Benefits From Better Economy | TJX Slows

Saks Benefits From Better Economy, TJX Slows

Thursday, 24 Feb 2011 09:16 AM

Luxury department store operator Saks Inc gave a more upbeat sales forecast than several lower-priced chains this week, showing the improving economy is still tough on stores that cater to the frugal.

Saks is coming off its best holiday season in years, as spending resumed on expensive dresses, handbags and shoes by top brands such as Marc Jacobs, Versace and Oscar de la Renta, lifting sales at established stores 8.4 percent.

Saks expects more of the same this year. It said Wednesday it anticipates sales at stores open at least a year, or same-store sales, to rise by a "mid-single digit" percentage as it continues to recover from the recession.

"We remain optimistic about the long-term outlook for Saks Fifth Avenue and for the luxury sector as a whole," Saks Chief Executive Steve Sadove told investors on a call.

Perhaps most encouraging for Saks, it was able to sell far more luxury items at full price over the 2010 holiday season.

In contrast, TJX Cos Inc, a so-called "off-price chain" that sells sharply discounted designer merchandise often returned to vendors by department stores, forecast continued sales growth, but at a much more modest pace.

TJX only expects same-store sales to rise between 1 percent and 2 percent this fiscal year.

TJX, whose chains include Marshalls and T.J. Maxx in the United States, Winners in Canada and T.K. Maxx in Europe, was one of the biggest winners during the recession, regularly posting double-digit sales gains as shoppers traded down from pricier stores.

Many U.S. shoppers, feeling better about their finances in part due to the stock market's rally, have begun the move back to department stores, as the holiday sales results of Saks and Macy's Inc show.

Other retailers' results also showed how chains that thrived during the recession are running out of steam.

Dollar Tree Inc, which sells most of its goods for $1, forecast more modest sales growth this year after same-store sales rose 6.3 percent in 2010.

TJX shares closed 91 cents down at $48.81, while Saks fell 31 cents to $11.86. The S&P Retail Index fell 1.8 percent.

Options traders are taking bearish positions in the SPDR S&P Retail fundin anticipation the shares of the exchange-traded fund will fall substantially in the coming months, said Interactive Brokers Group analyst Caitlin Duffy.

"Pessimistic players appear to be speculating that consumers, who now face higher prices at the pump, are likely to tighten their wallets," she added.

U.S. crude futures settled at their highest in nearly 2-1/2 years Wednesday, fueled by fears Libyan violence could spread to throughout the Middle East and disrupt oil supplies.

 

STILL SERVING BARGAIN HUNTERS

Saks rivals Nordstrom Inc and Neiman Marcus Group Inchave similarly reported strong holiday sales.

But part of TJX's challenge is that luxury retailers are taking a page out of its book.

For all the talk of how luxury sales are rebounding, Saks has closed seven department stores in the past year, leaving it with 47, preferring instead to expand its Off Fifth outlet chain, which competes with TJX's chains.

Sadove said Saks plans this year to add three or four Off Fifth stores to the 57 it now operates. Nordstrom is also planning to expand its Rack outlet chain.

"Whether we are in recessionary times or recoveries, value remains a constant top-of-mind priority with consumers," TJX Chief Executive Carol Meyrowitz said on a call with analysts.

TJX's forecast was dampened in part by weaker business in Europe, where the company said it would slow its expansion.

But Meyrowitz said the pace of openings in the Marshalls and T.J. Maxx chains would remain about the same this year. Still, given the pressure it's under, TJX plans on keeping "leaner" inventory this year to have more control over what it can charge customers.

TJX said same-store sales rose 2 percent and it reported a better-than-expected profit for the holiday quarter. Those gains compare with a 12 percent increase the year before.

© 2017 Thomson/Reuters. All rights reserved.

 
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Luxury department store operator Saks Inc gave a more upbeat sales forecast than several lower-priced chains this week, showing the improving economy is still tough on stores that cater to the frugal. Saks is coming off its best holiday season in years, as spending resumed...
Saks Benefits From Better Economy,TJX Slows
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2011-16-24
Thursday, 24 Feb 2011 09:16 AM
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