“Our comparable store sales increases of 1.5% in the second quarter and 3.8% for the six months were on top of 4.7% increases in both the second quarter and first six months of last year. Several merchandise categories showed sales strength during the second quarter, including women’s contemporary and advanced designer apparel; dresses; women’s shoes; handbags; fragrances; children’s apparel; and men’s accessories, shoes, and contemporary apparel,” Sadove continued.
The fiscal year ended February 2, 2013 included an extra week, creating a 53-week fiscal year that occurs every six years in the accounting cycle for many retailers, versus a 52-week fiscal year in other years. This 53rd week and later fiscal year end has pushed each of the quarter ends in 2013 later than in the prior year and is distorting certain comparisons. Adjusting for this distortion (comparing the periods ended August 3, 2013 with the periods ended August 4, 2012), management estimates that the current year second quarter and year-to-date comparable store sales increases would have been approximately 4.0% and 4.1%, respectively. On this basis, the New York City flagship store sales performance was better than the comparable store sales performance of the Company’s Saks Fifth Avenue stores in the aggregate for the quarter.
For the second quarter, the Company’s gross margin rate was 36.6% compared to last year’s second quarter rate of 37.2%. For the six months, the gross margin rate was 40.7% compared to 40.9% in the first six months of last year. Sadove commented, “Our gross margin deterioration in the second quarter was principally due to higher levels of markdowns in men’s, women’s shoes, and handbags. Sales in these areas were meaningfully above the Company average but fell below our level of inventory investments in these categories. Consequently, we incurred higher year-over-year markdowns as we progressed through our normal second quarter clearance period. In addition, we delayed the start date of our annual end-of-spring-season clearance sale, and in hindsight, we believe this negatively impacted our sales and gross margin performance for the quarter.”