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Saks Incorporated (SKS)
Q3 2009 Earnings Call
November 17, 2009 10:00 am ET
Stephen I. Sadove – Chairman and Chief Executive Officer
Ronald Frasch – President and Chief Merchandising Officer
Kevin Wills – Chief Financial Officer
Julia A. Bentley – Senior Vice President of Investor Relations
Deborah Weinswig - Citigroup
Analyst for Lorraine Hutchinson – Bank of America
Michelle Clark – Morgan Stanley
Emily Shanks – Barclays Capital
Ben Rowbotham for Adrianne Shapira - Goldman Sachs
Robert Drbul – Barclays Capital
Karru Martinson – Deutsche Bank
Todd Slater – Lazard Capital Markets
Karla [Costello] – JP Morgan
Mark Kaufman – Rafferty Capital
Dana Telsey – Telsey Advisory Group
Christine Chen - Needham & Company, LLC
Previous Statements by SKS
» Saks Incorporated Q2 2009 Earnings Call Transcript
» Saks Q4 2008 Earnings Call Transcript
» Saks Incorporated Q3 2008 (Qtr End 11/01/08) Earnings Call Transcript
Thank you very much. Good morning. This is Steve Sadove and I am joined on the call by Ron Frasch, President and Chief Merchandising Officer; Kevin Wills, our CFO and Julia Bentley, our Senior VP of IR. I would like to thank each of you for taking the time to join us.
First let me note that some of the comments on the call today as well as some of the information presented in our release related to future results or expectations are considered forward-looking information within the definition of the Federal Securities laws. The forward-looking information is premised on many factors, and actual consolidated results might differ materially from projected information, if there are any material changes in our assumptions or in the various risks related to our industry and our company. For a description of the risks and assumptions related to these projections, please refer to the release in our most recent filings with the SEC, including our most recent Form 10-K.
Today we will discuss the financial results for the third quarter and nine months ended October 31, 2009 and our outlook for the fourth quarter and update you on several other matters. At the end of the call we would be glad to respond to your questions. Before I turn the call over to Kevin to discuss the financial results let me take a couple of minutes to give you my overall assessment of the quarter.
I continue to be very pleased with how the entire organization has aggressively responded to the challenging environment. Just as our customers have changed the way they shop, we have made changes in the way we are managing our business. We have made needed adjustments to our merchandising, service and marketing strategies and carefully managed our inventories, expenses and capital spending.
In spite of our comparable store sales decline, we were able to post a modest third quarter profit. During the quarter our controlled inventory levels and disciplined promotional and clearance cadence paid off with a substantial improvement in our gross margin rate. Our continued focus on expense containment resulted in another meaningful reduction in the year-over-year SG&A expenses.
We successfully executed another $100 million common stock offering during the quarter which allowed us to eliminate outstanding borrowings on our revolving credit facility. The equity offering further strengthened our capital structure and has provided increased flexibility going forward. The environment remains very challenging. Although business appears a bit more stable and predictable than it did 12 or even 6 months ago. I am confident that luxury will rebound and we have taken and continue to take the necessary steps for Saks to emerge a stronger company when the economy returns to a more normalized state.
Let me now turn the call over to Kevin to provide more color on our operating results and balance sheet.
Thanks Steve. Good morning everyone. We posted net income of $1.9 million or $0.01 per share in the third quarter. This compares to a loss from continuing operations and before certain items of $16.9 million or $0.12 per share in last year’s third quarter. For the nine months we recorded a net loss from continuing operations of $57.4 million or $0.40 per share. This compares to a loss from continuing operations and before certain items of $27.8 million or $0.20 per share for the same period last year. There were no call out or certain items in the current year third quarter or nine month period but there were some in the prior year which were outlined in the release.
As we discuss the numbers today in comparison to the prior year, prior year numbers exclude these call out items. Comparable store sales declined 10.1% in the third quarter, generally in line with our expectations. On a two-year basis our comps are down about 20% for the third quarter although we did see modestly improving trends in each month of the quarter. For the nine months ended October 31, 2009 comparable store sales fell 18.5%. On a two-year basis our comps were down about 20% for the full nine months.
In the quarter Saks Fifth Avenue stores experienced continued weakness although towards quarter end several merchandise categories such as Women’s designer sportswear, [go range] apparel, outerwear, jewelry, women’s shoes and soft accessories have begun to show relative strength.
For the quarter sales trends in the New York City flagship store were more in line with the company’s aggregate comp store sales decline, a meaningful improvement from earlier this year. Saks’ direct revenues increased approximately 26% in the quarter and approximately 9% on a year-to-date basis. This year we further expanded our product offerings, made shopping experience enhancements to the website and enhanced our distribution center efficiency which have driven a steady improvement in sales. We remain excited about the potential in our direct business.