SAKS FIFTH AVENUE returns to profit, yet international expansion lags behind major competitors

Saks Inc.  reported a quarterly profit as it sold more items at full price and forecast continued sales growth at its established luxury department stores, sending its shares up nearly 5 %

Saks suffered some of the worst sales declines among U.S. retailers during the recession. But sales at stores open at least a year rose 8.4 percent in the holiday quarter as shoppers resumed spending on expensive dresses, handbags and shoes from top brands such as Marc Jacobs, Versace and Oscar de la Renta. The company said on Wednesday that it expected sales at stores open at least a year, or same-store sales, to rise by a mid-single digit percentage rate in its new fiscal year. Saks said overall sales rose 6.8 percent to $866.3 million in the fourth quarter ended on Jan. 29.

Helping matters, shoppers did not need to be lured by bargains to go shopping, lifting gross margins rose by 1.3 percentage points to 37.8 percent of sales, Chief Executive Officer Steve Sadove said in a statement.

Sales gains at Saks’ Fifth Avenue flagship store in Manhattan, which analysts estimate accounts for 10 percent of its business, and at the Off Fifth chain were just a bit below its overall same-store sales performance.

Saks reported fourth-quarter net income of $25 million, compared with a year-earlier loss of $4.6 million,. Saks has closed or said it would close seven of its department stores in the past year as it weeds out weaker locations, but it has expanded its Off Fifth outlet chain. It now operates 47 Saks Fifth Avenue stores and 57 outlets.

With the exception of Mexico, all existing international operations, most of them in franchising, have been registering a slower 2010, especially in the UAE due to the crisis and in Bahrain due to the increased instability in the country. The announced opening of SAKS FIFTH AVENUE in Kazakhstan (late 2012) is however, uncertain due to the delays in securing top luxury brands. Market sources indicated that Louis Vuitton and Chanel are the only two major international brands to have confirmed their presence in Almaty, Kazakhstan’s largest city.

British department store chain HARVEY NICHOLS is the undisputed international leader with more than 12 stores operating outside the UK. 2012 will see the opening of the first HARVEY NICHOLS in Kuwait, a franchising operation with regional retail leader Alshaya.