Saks’ Sales Rebound Continues, but Now Its Off-Price Business Is Struggling

Saks Fifth Avenue shoppers are flocking to the department store’s full-price wares — but discount chain Saks Off 5th is still struggling to draw in customers.

Parent company HBC reported second-quarter 2018 earnings on Wednesday and blamed widened losses on weaker-than-expected sales at Lord & Taylor and Off 5th. The company posted a net loss of C$147 million ($112.65 million), or 62 Canadian cents a share for the quarter ended Aug. 4, compared with a net loss of C$100 million, or 55 cents per share, a year earlier.

Still, this beat analysts’ forecasts of a loss of 67 cents per share, and the company’s shares rose 5 percent in morning trading. HBC also reported improved margins, raising adjusted earnings before interest, taxes, depreciation and amortization, to C$33 million from C$3 million during the same period in 2017.

The most obvious bright spot amid the results, though, was a 6 percent rise in comparable sales at Saks Fifth Avenue, which puts the department store’s rebound about on par with its competitors. (Nordstrom reported a 4 percent growth in comp sales in its last earnings report, while Neiman Marcus held strong at 6 percent.)

Helena Foulkes, HBC’s CEO, called Saks’ performance “especially encouraging,” saying: “The business’s ongoing strategy to elevate the brand through enhancement of its fashion offering, increased customer engagement and efforts to bring together the online and offline shopping experience continues to drive traction within the luxury segment.”

Even so, she added, “there is still significant work to be done to improve our top line at Lord & Taylor and Saks Off 5th, which have not met expectations. With the right leadership team now in place, our banners are empowered to develop and implement strategies that will best drive their businesses forward.”

Comparable sales dropped 3.8 percent at HBC’s department store group, which includes its Hudson’s Bay and Lord & Taylor banners, and fell 7.6 percent at Off 5th. The latter has hot competition in fellow off-price chains Nordstrom Rack and Macy’s Backstage, both of which have seen healthy growth in recent quarters, and — at least in Backstage’s case — should be poised for even more business as Macy’s expands its footprint to hundreds of doors around the country.

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