Department-store operator Saks (NYSE:SKS) is in position to take advantage of a segment of retailing that, so far, has withstood slowing consumer spending trends. High-end, fashion-conscious shoppers are proving less susceptible to high gasoline prices, subprime woes, and other macro-trends stealing away discretionary consumer dollars.

Saks is already benefiting from a sales perspective, but will recent divestitures eventually flow to earnings? Second-quarter results released tomorrow will shed further light on the subject. Here's what to expect.

What analysts say:

  • Buy, sell, or waffle? Fourteen analysts follow Saks. Five give it a thumbs-up, seven think it's one to hold on to, and two expect it to underperform. Our Motley Fool CAPS community offers Saks a three-star rating (out of five).
  • Revenue. Analysts are projecting $685 million in second-quarter sales, or about 10% below last year's second-quarter sales amount.
  • Earnings. While the company is still expected to post a loss of $0.15, it would be an improvement from last year's $0.25 loss.

What management says:
Management is calling for second-quarter same-store sales growth in the low double digits and expects improvements in the mid- to high single digits during the fall. Back when Saks announced first-quarter results, company officials were confident in reaching 8% operating margins "within the next three years or so," even though the fiscal 2007 margin should reach only 4%.

What management does:
Saks looks set to post another quarter of solid comparable-sales results. Investors already know that May comps improved an impressive 37.5%, thanks to a "promotional calendar shift;" there was a 3.9% pullback in June; and July was strong with a 14.9% increase in comps.

From a bottom-line perspective, Saks still has work to do. Profitability trends have been uneven as the company has worked to divest middle-of-the-road department-store concepts such as Carson Pirie Scott, Herbergers, Younkers, and Parisian to the likes of Bon-Ton Stores (NASDAQ:BONT) and Belk.

Margins

1/06

4/06

7/06

10/06

2/07

5/07

Gross

32.9%

30.0%

34.1%

34.2%

34.7%

35.0%

Operating

(4.2%)

(6.7%)

2.4%

3.3%

1.5%

2.5%

Net

0.8%

4.1%

0.4%

0.5%

1.8%

(0.4%)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Until Saks starts posting more consistent earnings and cash flow trends, I will remain partial to archrival Nordstrom (NYSE:JWN) because it has been able to couple strong sales growth with solid bottom-line results. Middle-market operators such as Kohl's (NYSE:KSS) and J.C. Penney (NYSE:JCP) have also proved able at bringing customers in the door, with tangible benefits for shareholders so far.

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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.