May 18, 2010 / 3:04 PM / 8 years ago

WRAPUP 4-Saks beats Street; TJX outlook disappoints

* Saks Q1 EPS 12 cts vs Wall Street view 5 cts

* Saks sees FY same-store sales up mid-single-digit range

* TJX sees FY EPS $3.21-$3.32 vs Street view $3.35

* Saks shares close off 4.3 pct; TJX down 3.5 pct (Adds analyst note on Saks; updates with closing stock prices)

By Phil Wahba

NEW YORK, May 18 (Reuters) - Saks Inc reported a higher-than-expected quarterly profit on Tuesday, while TJX, which won market share from the upscale retailer and major department stores in the recession, issued a forecast suggesting its recent pace of growth may cool.

TJX Cos Inc TJX.N, whose chains include T.J. Maxx and Marshalls, said sales at stores open at least a year rose 9 percent in the first quarter. But it forecast increases of 2 percent to 4 percent for the current quarter and 2 percent to 3 percent for the full year.

Saks SKS.N said same-store sales were up 6.1 percent in the quarter and would rise by a mid-single-digit percentage rate for the full year. The company is benefiting from easier comparisons with a year ago, when luxury spending collapsed.

But Saks Chief Executive Stephen Sadove said the pace of economic recovery remains uncertain, and TJX said it would continue to benefit from lingering caution among consumers.

“Consumers remain focused on value in both weak and strong economic environments,” TJX CEO Carol Meyrowitz said in a statement.

Saks’ gross margin rose 4.4 percentage points to 43.1 in the first quarter as the luxury department store benefited from more full-priced selling and lean inventories.

Saks expects inventory levels to be up a bit during the second half of the year, a sign of optimism about its ability to sell more merchandise.

Sadove said the flagship store on Manhattan’s Fifth Avenue had outperformed the retailer’s other full-line stores during the quarter, due in part to strong tourism in New York.

Saks said sales of men’s and women’s apparel and handbags and jewelry were top performers. TJX reported improving sales in men’s clothing.

Sadove has said in the past that luxury spending is tied to the stock market’s performance, which affects the net worth of the affluent more than it does other Americans.

Despite Saks’ improving fortunes, Lazard Capital Markets analyst Todd Slater said in a research note that its shares were pricey given weakness in the stock market and the “near certainty” of higher taxes on the wealthy hitting luxury spending.

TJX said inventory was up at its Marshalls and T.J. Maxx divisions but down 12 percent companywide in the first quarter. The company, which buys excess merchandise from vendors and sells it at steep discounts, said there were “excellent buying opportunities” in the marketplace.

Saks shares closed down 39 cents, or 4.3 percent, at $8.94 while TJX fell $1.57, or 3.5 percent, to $43.68. The Standard & Poor’s Retail Index .RLX was down 2.5 percent.

TJX OUTLOOK FALLS SHORT

TJX reported net income of $331.4 million, or 80 cents per share, for the first quarter, ended May 1, up from $209.2 million, or 49 cents per share, a year earlier.

Analysts on average expected 78 cents per share, according to Thomson Reuters I/B/E/S. [ID:nN18197193]

For the current quarter, TJX forecast earnings of 67 cents to 72 cents per share. Analysts were expecting 72 cents. For the full year, TJX expects a profit of $3.21 to $3.32 per share, while analysts were expecting $3.35.

TJX shares hit a 52-week high nearly one month ago, making it more vulnerable to a sell-off as it becomes difficult to outperform rivals by a large margin, one analyst said.

TJX’s profit forecast “marks the beginning of the end of material upward earnings revisions,” Jefferies analyst Randal Konik wrote in a research note.

Saks reported net income of $18.8 million, or 11 cents per share, for its first quarter, which also ended May 1. It posted a loss of $5.1 million, or 4 cents per share, a year earlier. [ID:nN18179272]

Excluding severance and store closing costs, Saks’ profit was 12 cents per share, 7 cents above analysts’ average estimate, according to Thomson Reuters I/B/E/S.

Saks is closing three of its 53 Saks Fifth Avenue stores in July, including locations in Portland, Oregon, and San Diego. Sadove said on a call with analysts he did not see a significant number of additional store closings.

The three stores that are closing generate about $40 million in annual sales. (Reporting by Phil Wahba; editing by John Wallace, Gary Hill)

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