It doesn't get much better for Saks
Comps rose a stunning 14.9%, good enough to trounce even the lofty Street expectation of 10.7%. If that weren't enough to lift your spirits, it gets even better: According to management, "nearly all merchandise categories at Saks Fifth Avenue performed well."
Luxury retailers are doing well these days, with higher gas and food prices affecting their target consumers less. We saw similar good news from Nordstrom
It's clear that Saks' decision to get rid of its stores catering to middle-income consumers was correct. A few years ago, the company started divesting these businesses, including the sales of Northern department stores to Bon-Ton Stores (Nasdaq: BONT), and the sale of Parisian to retailer Belk. It now runs its Saks Fifth Avenue stores, Saks Off 5th outlets, Club Libby Lu, and its website, Saks.com.
With the proceeds from those divestitures, shareholders got an immediate boost, by way of buybacks and special dividends. Debt got repaid in the longer term. Now, by focusing on the luxury segment, Saks can concentrate on what it does best, and it can do so with a cleaner balance sheet.
The string of same-store-sales increases should boost shareholder confidence even further. For the first half of this year, comps rose a full 13.9%. Investors have to feel good about that, especially given that the holiday season isn't even upon us yet and the fourth quarter traditionally accounts for more than 30% of the company's sales. As long as it keeps making the right merchandising decisions, it will be a happy holiday at Saks.
Fool contributor Larry Rothman is happy to receive feedback, and he promises to read it when he's not being wrestled by his three children. Feel free to email him at email@example.com. He doesn't have any positions in the companies mentioned. The Fool has a disclosure policy.