Saks Overcomes Markdowns

The luxury retailer meets earnings expectations for the fourth quarter.
By TSC Staff ,

Saks

(SKS)

reported higher fourth-quarter profit despite markdowns at its luxury unit.

The Alabama-based retail group recorded net income of $94.8 million, or 67 cents a share, for the fourth quarter ended Jan. 29, compared with net income of $80.6 million, or 56 cents a share, a year ago.

On a consolidated basis, fourth-quarter revenue increased 4.9% to $2.06 billion. Same-store sales grew 4.0%, while the gross margin rate declined by 120 basis points.

Analysts expected 67 cents a share, according to Thomson First Call.

The company's SDSG unit -- which consists of its various department store chains -- had flat operating income with same-store sales growth of 1.1%. The company's SFAE unit -- which carries the Sak's brand -- saw operating income decline 8% over the prior year, but same-store sales increased 8.4%. The company cited excess clearance-related markdowns and marketing costs for the disappointing results.

For 2005, Sak's sees low-single-digit comparable-store sales growth at SDSG and mid-single-digit comparable-store sales growth at SFAE.

Saks said the quarterly results had been "adjusted for the estimated impact of the expected restatement of the company's financial statements attributable to improper collections of vendor markdown allowances and operating lease accounting errors."

The company first announced a restatement Thursday, adding that the

Securities and Exchange Commission

had opened an informal probe into the accouting issue.

Shares closed at $15.60 Thursday.

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