Saks Posts Decent Comps in May

Luxury department store Saks Inc. (SKS - Analyst Report) has reported positive same-store sales and total sales for the month of May 2012, benefiting from the strong performance of women’s contemporary and "wear now" apparel.

Further, women’s shoes, fashion and fine jewelry, cosmetics and fragrances, men’s contemporary apparel, and men’s shoes all contributed to the decent sales results.

Saks’ comparable store sales increased 4.0% in May, with total sales for the four weeks ended May 26, 2012 climbing 3.7% to $215.8 million. The comparable sales growth for the month of May 2012 was within the mid-single digit guidance range for the second quarter.

For the four months ended May 26, 2012, sales climbed 4.1% year over year to $959.7 million compared with $921.8 million for the prior year four months ended May 28, 2011.

Saks’ peer Macy’s Inc. (M - Analyst Report) also performed well in the month of May. Macy’s total sales grew 4.1% to $2.0 billion for the four-week period ended May 26, 2012 compared with total sales of $1.9 billion for the month of May 2011. Same-store sales rose 4.2% year over year for the month.

Guidance

Saks projects same-store inventory levels to increase in the mid-single-digit range throughout fiscal 2012.

Saks has planned to invest in some operational initiatives and other strategies in the calendar year 2012 such as the project evolution systems implementation, hold and flow, and other local marketing business plans, which are expected to have a meaningful beneficial impact in the calendar year 2013 and beyond.

Further, the company intends to be very strategic in its SG&A spending, inventory management and capital expenditure. The company expects 30 to 50 basis points of SG&A expense deleverage in the second quarter and approximately 50 to 75 basis points in the second half of fiscal 2012.

The Zacks Consensus Estimate for the second quarter of 2012 is currently pegged at a loss of 8 cents.

However, we remain concerned with the ever-changing demands of the consumers, increased volatility in the financial markets and the overall uncertainty in the macroeconomic environment.

Currently, we have a long-term Neutral recommendation on Saks, which carries a Zacks #4 Rank (short-term Sell rating).