NEW YORK (Reuters) - Fashion sales fell victim to consumer cutbacks during the holidays and no respite is in sight this year, but upscale store chain Saks Inc (SKS.N) and off-price retailer TJX Cos Inc (TJX.N) signaled to investors they were working hard to weather the storm.
Saks posted a deeper-than-expected quarterly loss on Wednesday as even its more affluent shoppers headed to sales racks in the recession.
TJX, which buys fashion brands at below-wholesale prices and sells them at deep discounts, posted a profit that was better than expected, but its sales were flat, indicating that even thrifty consumers were not spending much.
Their results follow what was the worst holiday season in nearly four decades for U.S. retailers.
TJX shares closed up 7 percent at $23.12, as investors cheered its profit and comments about looking for flat current year earnings per share, said William Blair analyst Daniel Hofkin.
Saks' shares, after falling as much as 8 percent earlier on Wednesday, reversed the decline to close up 13 percent at $2.09 after Chief Executive Steve Sadove quashed what he said were rumors that Saks might seek bankruptcy protection.
Bankruptcy would destroy shareholder value, Sadove told analysts on a conference call. Our intent and focus is to increase shareholder value.
Both TJX and Saks expect the ravages of the past months to continue, with TJX declining to give a specific full-year forecast, citing the uncertain economic environment.
Saks went a step further, indicating that consumer thrift due to the economic downturn may not end any time soon.
We expect the economic environment will remain extremely challenging throughout 2009, if not beyond, Sadove said. Saks said it was still committed to luxury, would intensify its focus on some brands, and expects to have ample liquidity this year.
WEAKNESS ON FIFTH AVENUE
Retailers across the spectrum, from Saks and Nordstrom (JWN.N) to mid-priced department chains J.C. Penney (JCP.N) and Macy's Inc (M.N), have been hurt deeply by the recession, as they took deep discounts on merchandise to lure shoppers.
Saks posted a net loss of $98.8 million, or 72 cents a share, in its fiscal fourth quarter, compared with a profit of $39.5 million, or 26 cents per share, a year earlier.
Excluding asset impairment, severance expenses and other items, Saks lost 52 cents a share, more than the average analyst expectation of a loss of 30 cents a share, according to Reuters Estimates.
Revenue fell 14.9 percent to $835.5 million. Saks' New York City flagship store remained weak, with sales of women's clothes suffering the most.
Sadove said Saks had to go as deep as it did with discounts on clothes, but said in an interview that such discounting in the fourth quarter was a one-time affair. [nN25498314]
The retailer plans cost cuts of $50 million to $60 million in the current year from previously announced job reductions and other measures. It plans to cut capital expenditures to $60 million -- down over 50 percent from 2008 -- and is targeting a 20 percent decrease in inventory for 2009.
OFF-PRICE A TOUGH SELL
At TJX, net profit fell to $250.9 million, or 58 cents a share, in the fiscal fourth quarter, ended January 31, compared with $301.1 million, or 66 cents a share, a year earlier.
Excluding items, it earned 55 cents a share, topping the average estimate of 51 cents a share.
Results were partly hurt by the stronger dollar, which it expects will also hurt its profit in the current year.
Sales were flat at $5.4 billion, showing that shoppers at even its off-price stores were careful about spending money.
TJX, whose retail chains include T.J. Maxx, Marshalls, HomeGoods and A.J. Wright, buys excess merchandise at below-wholesale prices and sells it at up to 60 percent less than department stores and specialty retailers.
For the fiscal first quarter, TJX forecast earnings of 32 cents to 38 cents a share from continuing operations. It also forecast revenue of $4.2 billion and a same-store sales decline of 2 percent to 4 percent for the period.
TJX expects the first half of the fiscal year to be tougher and is enforcing cost cuts that include freezing the number of jobs and eliminating pay increases across most of the company.
It is also restructuring some areas of its business, and offering a voluntary early retirement program.
TJX declined to issue a specific full-year outlook, but said that it is broadly looking at per-share earnings that are flat with the prior year if same-store sales decline 2 percent, excluding the impact of currency exchange.
The broad comments on the year were a fine approach in this type of environment,' Hofkin said.
(Reporting by Aarthi Sivaraman; Editing by Brian Moss and Tim Dobbyn)