As a percent of sales, SG&A expenses (excluding the certain items) were 28.8% in the second quarter this year compared to 27.1% in the prior year second quarter and 27.7% for the current year six months compared to 26.1% for the same period last year. As anticipated, the Company experienced deleverage in the quarter and six months primarily related to incremental expenses needed to support its omni-channel and Project Evolution (technology) initiatives and its planned launch of saksoff5th.com, as well as additional marketing expenses targeted to maximize omni-channel revenues. Additionally, the Company’s saks.com sales continued to outpace its store sales, and these online sales carry a higher level of SG&A expenses. As the saks.com sales penetration increases, it is creating some natural SG&A expense deleverage for the Company. Furthermore, weaker than expected second quarter comparable store sales caused additional deleverage.
Excluding the aforementioned certain items, the Company’s operating loss was 3.4% of sales in the current year second quarter compared to an operating loss of 1.0% of sales in the prior year second quarter. Excluding the aforementioned certain items, the Company’s operating income was 2.4% of sales for the current year six months compared to operating income of 4.0% of sales in the prior year six month period.
Balance Sheet Highlights
Consolidated inventories at August 3, 2013 totaled $832.5 million. This represents an 11.1% increase over the prior year on a total basis and a 12.7% increase on a comparable stores basis. Quarter-end inventory levels were somewhat distorted due to the later fiscal quarter end this year of August 3 compared to July 28 last year. There were more receipts in the first week of August this year than in the last week of July last year, as it is typical for merchandise receipts to be more concentrated early in the month. Adjusting for this distortion, management estimates that the Company’s comparable store inventories would have increased by approximately 4.7% at quarter end.
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