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New York City Saks Inc. reported Tuesday a 66% increase in first-quarter earnings compared with weak year-ago results. The results, however, were below analysts’ expectations. Saks said increased discounting hurt profit margins as even wealthy customers were feeling squeezed.
Saks earned $18.27 million for the three months ended May 3, compared with $11.04 million in the year-ago period.
Revenues rose to $862.35 million compared with $792.75 million in the year-ago period. Same-store sales were up 8.4%. Same-store sales are considered a key indicator of a retailer's health. Net income was $18.3 million compared to $11.0 million for the same quarter in 2007.
In the company’s statement, chairman and chief executive Stephen I. Sadove, said, “Overall, I am pleased with the Company's first-quarter performance in light of the ongoing challenging macroeconomic and increasingly competitive retail environment. We made great progress in reducing and better positioning our inventory levels.”
Additionally, Sadove cited growth in the company’s Saks Direct and Off 5th brands as key contributors. Revenues in the Direct business were up 40% in the first quarter and the Off 5th prototype store that opened in Orlando, Fla., in April has been “extremely well received” according to Sadove.
Saks said the challenging economic environment will continue for the rest of the year. It forecast that same-store sales should be up in the low-single digits in the current quarter and mid-single digits in the second half of the year. The company added that inventory levels are expected to remain in line with the company's sales-growth expectations throughout the year.