Same-store sales at Saks Incorporated (SKS) went up 6.1% for the month of August, 2011, while it increased 11.9% in the seven months ended August 27, 2011.
Owned sales surged 5.5% to $168.0 million for the four-week period ended August 27, 2011 compared with $159.3 million in the same period ended August 28, 2010.
Further on a year-to-date basis, owned sales increased 10.0% to $1,539.8 million for the seven months ended August 27, 2011, compared with $1,399.5 million for the prior year seven months ended August 28, 2010.
Saks Direct reported good comparable store sales in August. In addition, the categories at Saks Fifth Avenue stores including women’s shoes, handbags, fashion jewelry, cosmetics, fragrances, and men’s clothing, shoes, and accessories fueled sales growth.
However, same-store sales at Saks’ peer company, Kohl’s Corporation (KSS) went down 1.9% in the four-week period ended August 27, 2011 compared with an increase of 4.5% in the year-ago period.
Saks’s stores and operations comprise Saks Fifth Avenue (these are principally free-standing stores in exclusive shopping destinations or anchor stores in upscale regional malls), Saks Fifth Avenue (SFA) OFF 5TH (these stores primarily target the value-conscious customers) and Saks Fifth Avenue e-commerce operations known as Saks Direct.
During the second quarter of 2011, the company’s Saks Fifth Avenue stores saw strong sales growth, particularly in women’s and men’s apparel, shoes and accessories. Saks Direct reported an approximately 50% increase in comparable same stores during the quarter. However, the performance of the Saks Fifth Avenue OFF 5TH was below the company’s aggregate comparable store sales performance.
Store Update
As of August 27, 2011, Saks operated 46 Saks Fifth Avenue stores, 59 Saks OFF 5TH stores, and saks.com.
On August 30, 2011, Saks Fifth Avenue OFF 5th plans to add five new stores in its portfolio for 2012, as part of its long-term expansion opportunity. Further, the new stores will be located in upscale outlets of Merrimack, Syracuse, Livermore, Grand Prairie, and Nashville.
Guidance
In the second quarter of 2011, Saks projected same-store sales to progress at the mid-to-high single digit range in the second half of the fiscal year.
Conclusion
Management is optimistic about Saks' performance in fiscal 2011, 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 expenditure investments.
However, Saks remains concerned with the recent volatility and downturn in the financial markets and the overall uncertainty in the macroeconomic environment. The company is therefore, expected to strategize with its expense, capital, and inventory spending, making investments in areas with the most potential for profitable growth.
Saks shares maintain a Zacks #2 Rank, which translates into a short-term Buy recommendation. Our long-term recommendation for the stock remains Outperform.
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