It's back to basics at department-store retailer Saks
The company showed continued progress after posting another strong quarter of sales and trimming its loss. While one could argue that bottom-line trends are improving, there is still considerable work to do for Saks to become profitable.
Saks announced second-quarter results Tuesday morning that included total sales jumping 15% on an impressive same-store sales increase of 13.2%. Based on monthly sales data, investors already knew that comps were going to be strong, and management provided further insight by saying that "customers are responding to our focused merchandise assortments as well as our customer service and marketing initiatives." It cited positive results in "nearly all merchandise categories," echoing the strong sales trends that mid-priced rivals Kohl's
Gross margins also improved markedly, as did expense leverage, meaning that other expense categories fell as a percentage of total sales. However, since Saks lost nearly $52 million in last year's quarter, the substantial improvement in the current quarter only pared the bottom-line loss -- to just less than $25 million.
The reported quarterly loss was $0.17 per share, but when excluding $0.03 in one-time items related to selling some brands, the results came in a penny better than analysts were expecting. It may not amount to much, but this could mean Saks is slightly ahead of schedule in reaching 8% operating margins "in the next three years or so."
Saks is definitely in the final innings of transforming itself. Over the past couple of years, management has divested middle-market department-store concepts such as Carson Pirie Scott, Herbergers, Younkers, and Parisian to the likes of Bon-Ton Stores
But until it starts posting more consistent profitability, I will remain partial to Kohl's and Penney's, which have combined strong sales trends with visible profit growth. Nordstrom
For related Foolishness:
- The Saks Are Packed
- Foolish Forecase: Bag Is Half-Full at Saks
- Fool on the Street: At Kohl's It's All About the Customer
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