Saks Q3 Net Triples, But Misses; Says Q4 Margins May Decline 'Modestly'

Nov.20.07 | About: Saks Incorporated (SKS)

Saks reported a tripling of third-quarter net income to $21.6 million, or $0.14/share, but missed analyst expectations of $0.16/share. Sales grew a better-than-expected 14% to $796.1M. Saks posted a comparable-store-sales increase of 11.4%. "We are pleased with the year-over-year improvement in our third quarter operating results which primarily was driven by strong comparable store sales growth and expense leverage," commented CEO Stephen I. Sadove. (Earnings call transcript later today). Despite its strong quarterly results, Mr. Sadove acknowledged the company "began to experience a more challenging promotional and overall macroeconomic environment. This resulted in modest downward pressure on our merchandise margins which was offset by the impact of unredeemed gift cards, producing a flat year-over-year gross margin rate for the quarter." Mr. Sadove is optimistic about Q4, but warned there may be a "modest" decline gross margins. Shares of Saks lost 4.2% to $20.13 on Monday, but were last up more than 5% to $21.20 in thin pre-market activity.

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