Funded debt (including capitalized leases, senior notes, and the debt and equity components of the convertible debentures) at July 28, 2012 totaled approximately $405.9 million, and debt-to-capitalization was 26.5% (without giving effect to cash on hand).
Net capital spending for the six months ended July 28, 2012 totaled approximately $37.8 million.
Outlook for the Balance of 2012
Sadove commented, “While the overall near-term macro environment remains uncertain, we are very excited about the future of Saks and our ability to generate continued growth. We remain focused on executing our core merchandising, service, and marketing strategies, and we are strategically and prudently evolving our business to fully embrace omni-channel retailing through a series of infrastructure and systems enhancements over the next few years. We believe these investments will position us for the future and allow us to deliver incremental sales and operating margin improvement over time.”“We are reaffirming our assumptions for the balance of 2012,” Sadove continued. The Company’s assumptions for the balance of 2012 are outlined below. Variation from the sales trends, up or down, could materially impact the other assumptions listed.
- Comparable store sales growth in the mid-single digit range for the second half of the fiscal year.
- Comparable store inventory levels are expected to be up in the mid-single digit range throughout the balance of the year.
- Based upon current inventory levels and composition and the Company’s promotional calendar and permanent markdown cadence, the Company expects its year-over-year gross margin rate to increase approximately 25 to 50 basis points in the second half of the fiscal year. Management expects the year-over-year improvement will be concentrated in the fourth quarter, with the third quarter year-over-year gross margin rate expected to be relatively flat.
- As a percent of sales on a year-over-year basis, the Company expects approximately 50 to 75 basis points of SG&A expense leverage in the second half of the fiscal year, with the leverage concentrated in the fourth quarter. SG&A dollar increases primarily are expected to arise from incremental variable costs associated with planned sales growth (primarily sales associates’ commissions) and investment spending to support the Company’s omni-channel initiatives and Project Evolution.
- Other Operating Expenses (rentals, depreciation, and taxes other than income taxes) are expected to total $165 million to $167 million for the second half of 2012. Depreciation and amortization, which is included in the above amounts, should total approximately $125 million for the full fiscal year.
- Based on existing debt arrangements, maturities, and interest rates, interest expense should total approximately $19 million for the second half of 2012.
- An effective tax rate of approximately 40.0% to 41.0% for the year.
- A basic common share count of approximately 150 million and a diluted common share count of approximately 194 million for the full fiscal year. Share counts used in earnings per share calculations are expected to fluctuate by quarter during the year based on income levels, convertible debt, and equity awards.
- Net capital expenditures of approximately $110 million to $120 million for the full year.
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