Retail
Saks (SKS) May Have Overly High Hopes For Its New York Flagship Store
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Luxury retailer Saks Inc. (SKS) today reported abysmal results, indicating that higher-end consumers are starting to feel the economic pinch as well. The company is betting that that its flagship Saks Fifth Avenue store in New York is going to help lead the company out of its funk even as Wall Street continues to flounder.
The company had a net loss of $31.7 million, or 23 cents per share, compared with a net loss of $24.6 million, or 17 cents, a year earlier. Revenue fell 3.6 percent to $662 million and same-store sales dropped 4 percent. The results missed Wall Street expectations and the shares are tanking.
Saks’ results underscore that the notion of some investors that the higher-end consumers somehow is immune to the economic slowdown is a debatable one. Other luxury retailers such as Nordstrom Inc. (JWN) and Neiman Marcus Group saw their same-store sales fall 6 percent and 1.4 percent in the latest quarter. Things, though, were particularly lousy at Saks.
"During the quarter, we experienced a softening across nearly all geographies and merchandise categories, although generally the better performing geographies and categories in prior quarters were still the better performing areas in the second quarter. Saks Chief Executive Stephen Sadlove said in the earnings press release.
The company’s New York City flagship store continued to outperform the company average but you have to wonder given the slowdown on Wall Street how long that will last. Saks, though, is optimistic. It is expecting same store sales to decline in the low-single digits based on high growth expectations from Saks Fifth Avenue.
Maybe Saks executives have missed all of the media reports about the layoffs on Wall Street and the declining bonuses being awarded to investment bankers and other luminaries. Perhaps the company missed it when Gov. David Patterson said the state was "officially" in a recession. The dollar also is rebounding, making New York less attractive to bargain-seeking foreign tourists
How are Saks customers who are laying-off their nannies going to splurge on a $1,295 pair of women’s platform boots by someone named Christian Louboutin? They probably don’t feel like spending $190 on Prada loafers for toddlers. As a parent of a son who turns 2 next month, I can’t fathom why someone would spend that much money on shoes they will grow out of fairly quickly. Then again, I am not the target market for Saks.
Jonathan Berr
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