Luxury department store Saks Inc. (SKS) has reported positive same-store sales and total sales for the month of March, benefiting from sales of women’s contemporary apparel including fine jewelry, handbags and men’s accessories, including shoes, tailored clothing and contemporary apparel.
Saks’ comparable store sales increased 6.3% in March, with total Saks sales for the five weeks ended March 31, 2012, also climbing 6.3% to $276.5 million, as compared to the sales of $260.2 million for the five weeks ended April 2, 2011. The comparable sales growth for the month of March is within the guidance range of 5% to 7% range for the full year 2012.
However, March same-store sales increase was lower than the 6.6% growth reported in February. Total sales year-to-date climbed 6.2% over the prior year period to $484.4 million compared to $456.3 million for the two months ended April 2, 2011.
Saks’ peer Macy’s Inc. (M) also performed strongly in the month of March. Macy’s total sales grew 6.9% to $2.2 billion for the five weeks ended March 31, 2012, while its sales climbed 7.3% for the month of March 2012 on a same-store basis.
According to Reuters, both Saks and Macy's are expected to outperform in 2012, reflecting rising consumer confidence and their growing income during the holiday season. While Saks relies on its private-label brands and selling items at full prices, Macy’s remain profitable with its unique private brands in the holiday quarter.
Guidance
Saks projects the same-store inventory levels to be up in the mid-single-digit range throughout fiscal year 2012.
Management is optimistic about its performance in fiscal 2012, as it has seen strong growth in sales across store formats, thanks to its merchandising, service and marketing initiatives. Further, the company intends to be very strategic in its SG&A spending, inventory management and capital expenditures.
The Zacks Consensus Estimate for first quarter 2012 is currently pegged at 19 cents and the full-year 2012 estimate is 50 cents.
However, Saks remains concerned about the increased volatility in the financial markets and the overall uncertainty in the macro-economic environment, which is forcing customers to stay away from discretionary items. Thus, we hold a Zacks #3 Rank for Saks, which translates into a short-term Hold rating. Currently, we maintain a long-term Neutral recommendation on the stock.
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