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Saks: Sales Miss, Warns on Margins

Rising inventories of designer clothing lead to price cuts


High-end retailer Saks (NYSE:SKS) reported increased first-quarter profits today, but warned investors that price cuts aimed at reducing inventories would cut into gross margins for the second quarter.

The company reported first-quarter profits of $32.1 million, up from $28.4 million during the same time last year. Adjusted EPS rose to 19 cents, beating analysts’ forecast by a penny, Reuters noted.

Option Plays Ahead of Retail Earnings
Option Plays Ahead of Retail Earnings

Saks said revenue increased to $753.6 million, up from $726 million last year. This also disappointed analysts, who had predicted first-quarter revenue of $762.6 million. Same-store sales were up by 4.8% over last year.

Shares of Saks were up slightly in Tuesday afternoon trading, hovering just over $10 a share.

Noting sluggish sales of women’s designer clothing, the company said it expected its gross margin to slide between 1 and 1.25 percentage points during the second quarter, as it reduced prices to clear inventories. Gross margins were expected to recover between 0.25 and 0.50 percentage points before the end of the year.

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