Shares of upscale retailer Saks Inc. fell 8 percent during Tuesday's trading after reporting lower-than-expected quarterly profit as markdowns pressured gross margin.
For the quarter ended May 3, the New York-based luxury retailer reported net income of $18.3 million, or 13 cents a share, compared with $11 million, or seven cents a share, a year ago.
Prior-year results included 12 cents in charges. Sales rose 8.8 percent to $862.4 million.
The mean estimates of analysts polled by Thomson Reuters were for earnings of 17 cents on revenue of $841.1 million.
New York-based Saks said it expects same-store sales or sales in stores open at least one year - a key retailer metric - to rise in the low single digits in the second quarter. The store also expects gross margin will increase modestly in the second, third and fourth quarters.
But gross margin contracted to 38.2 percent from 41.1 percent a year earlier, hurt by increased promotional activity and clearance markdowns.
We think this will be challenging in the current competitive environment and we think we could see some margin/same-store sales trade-off affecting results, Bank of America Securities analyst Dana Cohen wrote in a research note.
Saks shares closed down 93 cent, or 6.6 percent, to $13.20 on the New York Stock Exchange trading. The stock has fallen about 42 percent in the past year.