Getting in on a Bottom as Saks Reports June Sales

Jul.12.09 | About: Saks Incorporated (SKS)

Here is the release from Saks:

New York, New York (July 9, 2009)—Retailer Saks Incorporated (NYSE: SKS) (the “Company”) today announced that owned sales totaled $230.2 million for the five weeks ended July 4, 2009 compared to $239.3 million for the five weeks ended July 5, 2008, a 3.8% decrease. Comparable store sales decreased 4.4% for the month.

On a quarter-to-date basis, for the two months ended July 4, 2009, owned sales totaled $396.2 million compared to $463.2 million for the two months ended July 5, 2008, a 14.5% decrease. Comparable store sales decreased 15.2% for the two-month period.

On a year-to-date basis, for the five months ended July 4, 2009, owned sales totaled $1,011.3 million compared to $1,305.7 million for the five months ended July 5, 2008, a 22.5% decrease. Comparable store sales decreased 23.2% for the five-month period.
June sales performance was positively affected by the shift of a designer sale event into June this year from May last year. Management continues to estimate that comparable store sales will decline in the mid-teen range for the second fiscal quarter.

The Saks Fifth Avenue stores experienced continued weakness across all merchandise categories during the month. Saks Direct showed relative strength in June.
Prior year numbers have been adjusted to remove the sales of the Company’s discontinued Club Libby Lu operations.

Saks Incorporated operates 53 Saks Fifth Avenue stores, 54 Saks OFF 5TH stores, and

Here is the original investment thesis for Saks (SKS).

Now at first blush, the numbers seemed great and then when folks realized the Fashion event was moved into June from May last year, shares tanked Friday. This was fine by me because after initially buying then at $3.75, I sold them a week later at $4.55. Note: I rarely take positions for that short a time frame but at the time I wanted to free up some capital and was happy to take a 21% week's gain, expecting the price to retreat again.

I still wanted to own shares and being able to buy them Friday at an average price of $4.37 is a price I'm happy to own shares at.

Was the month and quarter to date as good / bad as it looks? June was clearly not as good due to the changing of the Fashion event. Now as for the quarter to date, comps just may not be as bad as they may seem. Remember at this time last year the government was mailing out stimulus checks to an estimated 130 million people / families. The average family of 4 got a check for $1800. Yes, I know we recently had another stimulus but the current one, only 11% completed does not mail checks directly to consumers to use but at this point has been primarily mailed to state and local government to use. It clearly has had no "stimulating" effect.

Opinions vary as to how much of 2008 payments found their way into the economy vs what was saved / used to pay off bills but it is safe to say that retail received a decent chunk of it. In that respect, 2008's spring / early summer results were skewed higher than they otherwise would have been. Another bright sign is that while the YTD sales decline is in the 20% range, the monthlys seem to be in the 12%-15% range which does show some lessening of the decline.

This is not to say by any means that Friday's results were good. It is to say that they were not quite as bad as an initial look may seem and for those of us planning to hold shares through an improvement, the trend is definitely in the right direction.

Any retail reversal will be a year in the making. But, if we want to be taking positions at bottom prices, we cannot wait for clear signs it is happening. By then the $4 stock you are looking at today will be a $10 stock and you will have missed a huge percentage of the appreciation.

Disclosure: Long SKS