Saks Inc. reported Wednesday a loss in its fiscal fourth quarter, reversing a year-earlier profit, weighed by charges related to the sale of some department stores and disappointing performance in its flagship luxury retail chain.
Saks also said it planned to pay a special $4 cash dividend once it completes the sale of its Northern Department Store Group, expected to occur by March 13. Its shares fell 1.9 percent, or 36 cents, to $18.54 in late morning trading on the New York Stock Exchange.
For the quarter ended Jan. 28, Saks reported a loss of $2.2 million, or 2 cents per share, versus a prior-year profit of $96.6 million, or 68 cents per share. Revenue fell to $1.77 billion from $2.07 billion a year ago, due to the sale of the Proffitt’s and McRae’s department store chains in July 2005.
The quarter’s results reflect charges of $56.3 million for writing down the value of goodwill and other assets in Saks’ department store group, which reduced profit by 42 cents per share, as well as legal expenses and employee retention and severance costs.
Operating income at Saks Fifth Avenue Enterprises, the luxury chain that is seen as Saks’ crown jewel, slid $50.4 million to $7.6 million during the quarter, hurt by lost revenue from a New Orleans department store, store closings and legal expenses.
Sales in Saks department stores open at least a year — a closely watched performance gauge called comparable sales — rose just 1.4 percent during the quarter, below company’s expectations for a mid-single digit increase. Saks’ Chief Executive Officer Stephen Sadove called the quarter’s results “unacceptable,” and said he would be directly involved in the day-to-day operations going forward.
Over the past year, Saks has been shedding its mid-tier regional department store chains in order to focus on its high-end department store business.
In October 2005, the retailer said it would sell its Northern Department Store Group to Bon-Ton Stores Inc. for $1.1 billion in cash plus the assumption of $85 million of debt.
Earlier this year, Saks said it was exploring strategic options for its Parisian chain, which it expects to sell this year. Once it sheds the Parisian business, Saks said it would be left with just the Saks Fifth Avenue Enterprises by 2007.
Saks projected same-store sales in 2006 would increase in the low-to-mid single digit range for Saks Fifth Avenue Enterprises. It also called 2006 a “transition year,” during which it will incur more costs related to redundant operations.