Strengths in several merchandise categories, including women’s contemporary and advanced designer apparel; fragrances; children’s apparel; and men’s accessories, shoes and contemporary apparel contributed to a comparable store sales increase of 1.5% in the second quarter ended August 3 at Saks Incorporated.
But the company recorded a net loss of $19.6 million, or $.13 per diluted share, for the quarter, compared to a net loss of $12.3 million, or $.08 per diluted share, for the same quarter last year. Adjusted to exclude after-tax charges, store-closing costs and $ expenses related to the pending merger with Hudson’s Bay Company, net loss for the quarter was $14.4 million, or $.10 per share, compared to an adjusted net loss of $8 million, or $.05 per share, for the same quarter last year.
“While the second quarter was our 14th consecutive quarter of posting a comparable store sales increase, our sales growth was modestly below our expectations. This shortfall contributed to our second quarter year-over-year gross margin rate decline and SG&A expense deleverage,” said Stephen I. Sadove, chairman and CEO.
On July 29, Hudson’s Bay Company and Saks entered into a definitive merger agreement whereby HBC will acquire Saks for $16 per share in an all-cash transaction valued at approximately $2.9 billion, including debt. The transaction has been approved by each company’s board of directors and is expected to close before the end of the calendar year, subject to approval by Saks’ shareholders, regulatory approvals and other customary closing conditions.
The company’s gross margin rate was 36.6% compared to last year’s second quarter rate of 37.2%.
“Our gross margin deterioration in the second quarter was principally due to higher levels of markdowns in men’s, women’s shoes, and handbags. Sales in these areas were meaningfully above the company average but fell below our level of inventory investments in these categories,” added Sadove. “Consequently, we incurred higher year-over-year markdowns as we progressed through our normal second quarter clearance period. In addition, we delayed the start date of our annual end-of-spring-season clearance sale, and in hindsight, we believe this negatively impacted our sales and gross margin performance for the quarter.”
The company currently operates 41 Saks Fifth Avenue stores, 68 Saks Fifth Avenue OFF 5TH stores and saks.com.