By Aarthi Sivaraman
NEW YORK, May 19 (Reuters) - Saks Inc sought refuge in cost cuts to post a smaller-than-expected quarterly loss amid falling sales as department stores lose customers to lower-priced outlets like TJX Cos Inc, which reported higher profit.
Saks said it is hunting ways to slash costs to combat the steep decline in sales that it forecast earlier. The wide-ranging measures include cuts in executive salaries, advertising, executive travel and staffing levels in stores, Saks said.
TJX, which operates the off-price T.J. Maxx and Marshalls chains, posted higher profit in line with analysts' estimates. As it also cuts costs, TJX is trying to attract new customers by using more sources for branded merchandise and by taking advantage of real estate opportunities made available as other retailers cut back.
But it said its plans were still conservative due to the economic uncertainty.
Saks and TJX, like most retailers, have witnessed wide cutbacks from consumers who are facing job losses, tight credit and a U.S. housing market slump. Where consumers spend, they have sought bargains and stuck to needs like food, forcing retailers to cut costs and slash inventories to cope.
While Saks and TJX cater to different audiences, both had their own merits, said Lazard Capital Markets analyst Todd Slater.
Contrary to the belief that TJX's stock does well only in a downturn, it can outperform when consumer spending improves, he said. 'It's different than Saks. There is more potential upside at Saks (in a recovery) but there is more risk as well. It is a higher-risk, higher-reward scenario.'
Last week, other department stores such as Macy's Inc and J.C. Penney also signaled sales of discretionary items would remain under pressure.
Separately on Tuesday, Home Depot Inc beat expectations with its quarterly profit due to expense reductions. It is also seeing sales suffer..
SAKS LOSS
Saks' net loss was $5.1 million, or 4 cents per share, in the fiscal first quarter that ended May 2, compared with a profit of $17.3 million or 12 cents per share, a year earlier.
Excluding some charges, its loss of 3 cents per share was much smaller than the loss of 26 cents per share expected on average, according to Reuters Estimates.
Sales fell 26.9 percent to $621.3 million, as sales at stores open at least a year dropped 27.6 percent.
For the full year, Saks still forecast same-store sales to decline in the low double digit percentage range. It is also targeting a 20 percent decrease in inventory for 2009.
It now expects a roughly $60 million reduction in 2009 selling, general and administrative costs, from its prior expectation of a $20 million to $30 million reduction.
It also said capital expenditures would be about $55 million, down from the $60 million it expected earlier.
Despite Saks' efforts, its biggest issue was the faltering demand for luxury items, said Barclays analyst Robert Drbul.
'The big question is when will the top line return? When will demand return? That's out of their control,' Drbul said.
P. Schoenfeld Asset Management LP, a hedge fund firm and Saks shareholder, has called for governance reforms at the struggling luxury chain.
Saks said it was not averse to closing stores that were not feasible, while it would also not shy away from new stores if it saw the opportunity.
TJX IN-LINE
Net income for TJX rose to $209.2 million, or 49 cents per share, in the first quarter ended on May 2, from $193.8 million, or 43 cents per share, a year earlier.
Analysts on average were expecting 49 cents per share.
Sales rose 1 percent to $4.35 billion, even after a 6 percentage-point hit from the stronger U.S. dollar that reduced the value of overseas sales. Same-store sales rose 2 percent.
TJX said it was seeing sales in Florida 'starting to come back' and increasing 'very slowly' in California. Consumers in those markets have been deeply affected by the housing slump.
TJX, which buys excess apparel, accessories and home goods in bulk and sells them at deep discounts, said it expected to earn 43 to 49 cents per share in the second quarter, and sales of $4.4 billion to $4.5 billion.
Analysts on average were expecting 43 cents.
TJX also expects to open 80 to 85 new stores this year, many in Europe, up from its prior view of 65 new stores. It expects to buy back about $250 million in shares and achieve $150 million in cost savings.
Saks shares closed up 73 cents or 18 percent at $4.81 on the New York Stock Exchange on Tuesday, while TJX closed up $1.09 or 4 percent at $29.03.
(Reporting by Aarthi Sivaraman, additional reporting by Martinne Geller and Dhanya Skariachan; editing by Dave Zimmerman, Maureen Bavdek and Matthew Lewis)
((aarthi.sivaraman@thomsonreuters.com; +1 646 223 6191; Reuters Messaging: aarthi.sivaraman.reuters.com@reuters.net)) Keywords: USA RETAIL/ (See http://blogs.reuters.com/category/themes/shop-talk/ for SHOP TALK -- Reuters' retail and consumer blog) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, May 19 (Reuters) - Saks Inc sought refuge in cost cuts to post a smaller-than-expected quarterly loss amid falling sales as department stores lose customers to lower-priced outlets like TJX Cos Inc, which reported higher profit.
Saks said it is hunting ways to slash costs to combat the steep decline in sales that it forecast earlier. The wide-ranging measures include cuts in executive salaries, advertising, executive travel and staffing levels in stores, Saks said.
TJX, which operates the off-price T.J. Maxx and Marshalls chains, posted higher profit in line with analysts' estimates. As it also cuts costs, TJX is trying to attract new customers by using more sources for branded merchandise and by taking advantage of real estate opportunities made available as other retailers cut back.
But it said its plans were still conservative due to the economic uncertainty.
Saks and TJX, like most retailers, have witnessed wide cutbacks from consumers who are facing job losses, tight credit and a U.S. housing market slump. Where consumers spend, they have sought bargains and stuck to needs like food, forcing retailers to cut costs and slash inventories to cope.
While Saks and TJX cater to different audiences, both had their own merits, said Lazard Capital Markets analyst Todd Slater.
Contrary to the belief that TJX's stock does well only in a downturn, it can outperform when consumer spending improves, he said. 'It's different than Saks. There is more potential upside at Saks (in a recovery) but there is more risk as well. It is a higher-risk, higher-reward scenario.'
Last week, other department stores such as Macy's Inc and J.C. Penney also signaled sales of discretionary items would remain under pressure.
Separately on Tuesday, Home Depot Inc beat expectations with its quarterly profit due to expense reductions. It is also seeing sales suffer..
SAKS LOSS
Saks' net loss was $5.1 million, or 4 cents per share, in the fiscal first quarter that ended May 2, compared with a profit of $17.3 million or 12 cents per share, a year earlier.
Excluding some charges, its loss of 3 cents per share was much smaller than the loss of 26 cents per share expected on average, according to Reuters Estimates.
Sales fell 26.9 percent to $621.3 million, as sales at stores open at least a year dropped 27.6 percent.
For the full year, Saks still forecast same-store sales to decline in the low double digit percentage range. It is also targeting a 20 percent decrease in inventory for 2009.
It now expects a roughly $60 million reduction in 2009 selling, general and administrative costs, from its prior expectation of a $20 million to $30 million reduction.
It also said capital expenditures would be about $55 million, down from the $60 million it expected earlier.
Despite Saks' efforts, its biggest issue was the faltering demand for luxury items, said Barclays analyst Robert Drbul.
'The big question is when will the top line return? When will demand return? That's out of their control,' Drbul said.
P. Schoenfeld Asset Management LP, a hedge fund firm and Saks shareholder, has called for governance reforms at the struggling luxury chain.
Saks said it was not averse to closing stores that were not feasible, while it would also not shy away from new stores if it saw the opportunity.
TJX IN-LINE
Net income for TJX rose to $209.2 million, or 49 cents per share, in the first quarter ended on May 2, from $193.8 million, or 43 cents per share, a year earlier.
Analysts on average were expecting 49 cents per share.
Sales rose 1 percent to $4.35 billion, even after a 6 percentage-point hit from the stronger U.S. dollar that reduced the value of overseas sales. Same-store sales rose 2 percent.
TJX said it was seeing sales in Florida 'starting to come back' and increasing 'very slowly' in California. Consumers in those markets have been deeply affected by the housing slump.
TJX, which buys excess apparel, accessories and home goods in bulk and sells them at deep discounts, said it expected to earn 43 to 49 cents per share in the second quarter, and sales of $4.4 billion to $4.5 billion.
Analysts on average were expecting 43 cents.
TJX also expects to open 80 to 85 new stores this year, many in Europe, up from its prior view of 65 new stores. It expects to buy back about $250 million in shares and achieve $150 million in cost savings.
Saks shares closed up 73 cents or 18 percent at $4.81 on the New York Stock Exchange on Tuesday, while TJX closed up $1.09 or 4 percent at $29.03.
(Reporting by Aarthi Sivaraman, additional reporting by Martinne Geller and Dhanya Skariachan; editing by Dave Zimmerman, Maureen Bavdek and Matthew Lewis)
((aarthi.sivaraman@thomsonreuters.com; +1 646 223 6191; Reuters Messaging: aarthi.sivaraman.reuters.com@reuters.net)) Keywords: USA RETAIL/ (See http://blogs.reuters.com/category/themes/shop-talk/ for SHOP TALK -- Reuters' retail and consumer blog) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.