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Saks Bags a Big Profit Rise

The retailer cautions that it has seen promotional pressure.
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Saks' (SKS) third-quarter profit more than tripled as sales soared, though the luxury retailer said it had downward pressure on margins amid signs of a promotional retail environment.

For the quarter ended Nov. 3, the New York-based retailer earned $21.6 million, or 14 cents a share. A year earlier, earnings were $6.2 million, or 5 cents a share, including about $6.3 million losses from discontinued operations.

Excluding one-time charges totaling $4.3 million, or 3 cents a share, for the latest quarter, Saks' earnings beat Wall Street's estimate by a penny, according to Thomson Financial.

Revenue rose to $796.1 million from $697 million a year earlier, topping analysts' average estimate of $781 million. Same-store sales, or sales at stores open at least a year, surged 11.4%.

Saks said it had a solid performance across all geographic regions, with strength in merchandise such as handbags, women's shoes, jewelry, men's apparel and accessories.

Though Saks said the same-store sales exceeded its expectation, it began to experience "a more challenging promotional and overall macroeconomic environment," which hurt its margins. The pressure was offset by unredeemed gift cards, which kept Saks' margins steady at 42%.

While most retailers have seen a slowdown in consumers' spending habits, high-end chains like Saks are viewed as less likely to be hurt by economic woes. For the most part, these chains have so far held up, as evidenced by Saks' big sales jump and

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Saks expects same-store sales growth in the high-single-digits for the fourth quarter, but said it may see a modest decline in gross margins for the quarter.

"We believe our inventories are appropriately positioned as we enter the holiday season; however, it is clear that we are now operating in a more challenging economic and competitive environment," said Chairman and CEO Stephen Sadove.

Shares of Saks recently were up 73 cents, or 3.6%, to $20.86.