Updated from 6:13 p.m. EST

Despite the economic malaise, chichi retailers

Saks

(SKS)

and

NeimanMarcus Group

(NMG)

still found gold on the bottom line.

A small increase in sales at Neiman Marcus led to a 33% jump inearnings per share at the Dallas-based company. Meanwhile, Saks posted a 27% increase in per-share earnings, in spite of a slump in sales.

In its second quarter ended Feb. 1, Neiman Marcus earned $32.5million, or 68 cents a share, on $938.5 million in sales. That was upfrom the year-ago period, when the company earned $24.3 million, or 51cents a share, on sales of $908.1 million.

Analysts had been expecting Neiman Marcus to earn 67 cents a share,according to Thomson Financial/First Call.

For its part, Saks earned $68.1 million, or 47 cents a share, on$1.84 billion in revenue in its fourth quarter ended Feb. 1. In theyear-ago period, the company earned about $54 million, or 37 cents ashare, on $1.91 billion in sales.

Excluding one-time charges, Saks earned $84.4 million, or 58 centsa share. Wall Street analysts had projected that Saks would earn 50cents per share in the quarter on this basis.

Neiman Marcus' earnings increase came in part as a result of animprovement in its gross profit margin. Gross margin is the differencebetween what a company charges for its goods and what it paysfor them. In the quarter, Neiman Marcus gross marginsincreased to 30.25% of sales, up 136 basis points from the same perioda year earlier.

Lower markdowns helped boost gross margins, said Jim Skinner,Neiman Marcus' chief financial officer, on a conference call. In thesame period a year ago, the company was very aggressive in itspromotions, he said.

The improvement in gross margin was partially offset by an increasein sales, general and administrative costs. Such costs increased 30basis points to 24.03% of sales.

Skinner blamed the rise on higher ratios of cost to sales at thecompany's new stores as well as higher costs of health care and otherbenefits.

Neiman Marcus declined to project its fiscal third-quarterearnings. However, Skinner warned that the company's comparable-storesales were coming in lower than expected.

Previously, Neiman Marcus expected its same-store sales in itsthird quarter to increase 2% to 4%, he said. But due to cold weatherthat blanketed much of the country in February and the uncertainpolitical environment, the company now expects same-store sales torange from a decline of 1% to an increase of 1%. Same-store salescompare results at shops open more than one year.

As with Neiman Marcus, a decline in expenses helped drive Saks'earnings growth. The Birmingham, Ala.-based company increased its grossmargins 200 basis points to 35.6% of sales in the quarter. Meanwhile,the company's sales, general and administrative expenses declined 30basis points to 18.6% of sales.

Saks projected that its fiscal 2003 earnings per share could growby a percentage range in the mid-single digits over 2002, excluding one-timecharges.