Saks Fifth Avenue issued first-quarter results Tuesday, posting a 13 percent increase in net income despite weak demand for its women's designer jeans line that helped limit overall sales, which fell short of Wall Street expectations. The New York-based luxury retailer said it plans on issuing steep discounts on a number of products to clear out inventory, a move that will diminish the company's gross margins in the months to come.
Like most retailers at the luxury end of the spectrum, Saks struggled with weak sales during the recession, but has since seen its shoppers return as wealthier consumers have returned to spending freely on status goods. Of course, while upscale shoppers are still favoring luxury chains like Saks and Macy's for apparel and accessories, many have begun shopping at lower-end stores for necessities such as household goods and other products in which name brand is not a big deal.
In the three months ended March 30th, Saks profit came to $32.1 million, or 18 cents per share, up slightly from its year-earlier profit of $28.4 million, or 16 cents a share. Excluding certain one-time charges including costs related to the company's new distribution center, earnings were 19 cents a share, exceeding by a penny the consensus estimate of 18 cents projected by economists in a recent Bloomberg poll. Overall revenue, meanwhile, increased 3.8 percent from a year ago to $753.6 million, just shy of the $761.7 million estimate projected by the economists in the Bloomberg survey.