Saks posts smaller 1st-quarter loss than expected

NEW YORK — Luxury retailer Saks Inc. reported a loss for the first quarter Tuesday as it struggles with the pullback in spending by its wealthy customers. Still, the results beat analysts' expectations as the chain benefited from cost cuts — sending shares up nearly 18 percent.

The operator of Saks Fifth Avenue stores has seen Diego Della Valle, the founder of Italian luxury shoe and handbag maker Tod's SpA become the company's second-largest shareholder in recent weeks after Mexican billionaire mogul Carlos Slim.

Shares rose 73 cents, or 17.9 percent, to close at $4.81 Tuesday.

Saks said it lost $5.1 million, or 4 cents per share, in the first quarter ended May 2. That compares with a profit of $17.3 million, or 12 cents per share, a year earlier.

Revenue fell 27 percent to $621.3 million, from $850 million a year earlier. Sales at stores open at least a year, known as same-store sales, dropped almost 28 percent. Same-store sales are considered a key indicator of a retailer's health.

Analysts were expecting a loss of 26 cents per share on revenue of nearly $620 million.

"Although the sales environment remains extremely difficult, we are carefully managing inventories, expenses and capital spending, and through these actions our first-quarter operating performance exceeded expectations," Chairman and Chief Executive Stephen I. Sadove said in a statement. He added that the company is taking necessary actions to "emerge as an even stronger company once the economic conditions improve."

After suffering through a tough holiday shopping season, New York-based Saks said in January that it was eliminating 1,100 jobs and taking other steps to cut costs in 2009. The company said Tuesday that it now expects to cut expenses by about $60 million this year.

The job cuts were in both corporate support and store positions and amount to about 9 percent of the company's work force. The cuts follow the retailer's announcement in November that it would discontinue its Club Libby Lu specialty apparel chain, which employed about 1,700. The retailer is also working with suppliers to lower prices on designer goods and is cutting inventory.

While businesses in other retail segments have seen their sales declines moderating in the last two months, the luxury business has not shown any marked improvement. Saks said its April same-store sales dropped 32 percent, more than the 30.5 percent that analysts had expected.

The company said Tuesday that Saks Fifth Avenue saw weakness across all merchandise categories, geographies, and channels of distribution during the quarter. Consistent with the fourth quarter, the company's New York City flagship store suffered steeper same-store sales declines than the rest of the chain.

Saks reiterated its sales outlook Tuesday, saying that it expects that for the full year, same-store sales will decline by low double-digit percentages, comprised of a decline in the mid-teen percentage range for the second quarter and a decline of mid- to high single digits in the second half of the fiscal year.

Della Valle has raised to nearly 6 percent his stake in Saks Inc., buying nearly 8.5 million shares in Saks between Feb. 20 and May 7, according to a filing last week with the Securities and Exchange Commission.

In addition to about a dozen Tod's stores and outlets in the United States, Tod's shoes and handbags are at Saks, including the Restyled D-Bag Tote, which lists on Saks' Web site for $1,495, and $475 Dee Loafers. Tod's produces footwear and handbags under the Tod's and Hogan brands, and apparel under the brand name Fay.

Saks last fall introduced a "poison pill" into its share structure, which is generally done to avert hostile takeovers, after Slim increased his stake in the retailer.

The company said its board declared a distribution of one preferred share purchase right on each of the company's common shares. The rights will be exercisable if a person or group acquires 20 percent or more of Saks' shares, or starts a tender offer that would lead to them owning as much.

Saks said its board is also authorized to reduce the 20 percent threshold to "not less than" 10 percent.

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AP Business Writer Colleen Barry in Milan, Italy, contributed to this report.

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