Earnings Preview: Saks seen posting solid 1st qtr

OVERVIEW: New York-based Saks Inc. has been somewhat buffered from weakening economic trends because of its high-end clientele. However, the company is not immune from the broader economic downturn and has acknowledged it expects an increasingly promotional environment in 2008.

Same-store sales, or sales in stores open at least one year, rose 23.9 percent in April, on strong demand for women's designer clothes. In March, same-store sales fell 2.9 percent, missing analyst expectations. Same-store sales rose 3.4 percent in February.

Preliminary results for the quarter ended May 3 indicate same-store sales climbed 8.4 percent, with total sales up 8.6 percent to $853.4 million.

Same-store sales is an important indicator of retailer performance because it measures sales at existing stores rather than newly opened ones.

BY THE NUMBERS: Analysts polled by Thomson Financial, on average, predict a profit of 16 cents per share on revenue of $840.4 million.

ANALYST TAKE: Citi analyst Deborah L. Weinswig called the retailer's first-quarter same-store sales growth impressive.

In a note to clients on May 12, she wrote results were driven by promotions in April, leading to a surge in same-store sales.

"We believe Saks' gross margin deteriorated as a result of the company's increased promotional intensity during the quarter and the concentration of business during sale periods," she wrote.

She said she believes Sak's inventories are in "fairly good shape" as customers responded well to the promotional activity. She rates the company "Hold."