Saks Swings to Loss, Sets Dividend

It will pay $4 to shareholders with proceeds from the Bon-Ton deal.
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Saks

(SKS)

swung to a fourth-quarter loss that reflected charges and missed estimates before items. Its stock rose, however, after the department-store chain said it plans to pay a special dividend of $4 related to its recent transaction with

Bon-Ton Stores

(BONT)

.

Saks lost $2.2 million, or 2 cents a share, in the quarter, compared with earnings of $96.6 million, or 68 cents a share, a year ago. Among other special items, the latest quarter included a writedown related to goodwill and other assets of $56.3 million, or 42 cents a share. Pre-item earnings of 45 cents a share were 13 cents short of estimates.

Fourth-quarter sales fell 14.2% from a year ago to $1.77 billion, reflecting divested assets. Analysts expected $1.78 billion in the period. Same-store sales rose 1.3% in the quarter.

"The consolidated gross margin rate declined by 100 basis points from last year, primarily due to incremental markdowns taken at Saks Fifth Avenue Enterprises," the company said. "As a percent of sales, selling, general and administrative expenses increased by 90 basis points over the prior year. Excluding the expenses related to the aforementioned investigations and retention/severance, the SG&A rate as a percent of sales would have increased by approximately 20 basis points over the prior year."

Saks agreed in January to sell 142 department stores operating as Younkers, Herberger's, Carson Pirie Scott, Bergner's and Boston Stores to Bon-Ton for $1.1 billion, resulting in the special dividend set Wednesday.

After the sales, Saks will consist primarily of the Saks Fifth Avenue Enterprises division, which recorded operating income of $7.6 million in the fourth quarter, down $50.4 million from a year ago. The decline reflected stores closed in New Orleans and at other locations, plus lower gross margin.

"SFAE's fourth-quarter performance was unacceptable," the company said. "Comparable-store sales rose 1.4% in the quarter, which was substantially below our expectation of a mid-single digit increase. Consequently, in order to balance inventories by year-end, we took significant markdowns and accelerated two major clearance events during the quarter. In addition, gross margin was negatively affected by a decline in the year-over-year amount of markdown support received from vendors. SG&A dollars declined modestly during the quarter."

On Instinet, Saks rose 40 cents, or 2.1%, to $19.30.