Investors are eating up

Saks'

(SKS)

smaller-than-expected first-quarter loss, sending shares soaring 23% in morning trading.

But this surprise does not negate the fact that the high-end retailer has been one of the hardest hit chains during the recession. During the holiday season the company was forced to resort to deep discounts of more than 70% in order to attract consumers.

Saks' stock price has averaged approximately $2.89 per share since the beginning of 2009 and at one point this year reached an all-time low of $1.55 per share.

During the quarter, the company recorded a loss of $5.1 million, or 4 cents a share, compared with a profit of $17.3 million, or 12 cents, a year earlier. Analysts expected a loss of 26 cents a share.

Sales tanked 27% to $621.3 million from $850 million in the year-ago period, while same-store sales dropped 27.6%.

The company said Saks Fifth Avenue saw weakness across all merchandise categories, geographies, and channels of distribution during the quarter.

Saks reiterated its full-year guidance, saying it expects same-store sales will decline by low double-digit percentages.

In recent weeks, Diego Della Valle, the founder of Italian luxury shoe and handbag maker Tod's SpA, become the company's second-largest shareholder.

On Monday, P. Schoenfeld Asset Management, which owns about 1.5% of the company's total shares, urged shareholders in a proxy letter to

make changes to Saks' board. The group claimed the department store's lackluster performance is not only due to economic difficulties but poor management.

Last week rival

Nordstrom

(JWN) - Get Report

posted a

32% decline in first-quarter profit , but raised its full-year outlook in anticipation of higher gross profit and an increase in credit-card revenue.

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