Saks Incorporated (SKS)
Q3 2009 Earnings Call Transcript
November 17, 2009 10:00 a.m. ET

Executives

Stephen I. Sadove - Chairman and Chief Executive Officer
Kevin Wills - Executive Vice President and Chief Financial Officer
Ronald L. Frasch - President and Chief Merchandising Officer
Julia Bentley - Senior Vice President of Investor Relations

Analysts

Deborah Weinswig - Citigroup
Rick Patel - Bank of America/Merrill Lynch
Michelle Clark - Morgan Stanley
Emily Shanks - Barclays Capital
Benjamin Rowbotham - Goldman Sachs
Bob Drbul - Barclays Capital
Karru Martinson - Deutsche Bank
Jennifer Davis - Lazard Capital Markets
Carla Casella - JPMorgan
Mark Kaufman - Rafferty Capital
Dana Telsey - Telsey Advisory Group
Christine Chen - Needham & Company

Presentation

Operator

Good morning. My name is Wendy and I will be your conference Operator today. At this time, I would like to welcome everyone to the Saks Incorporated Third Quarter Earnings Conference Call.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you.

I would now like to turn the call over to Mr. Steve Sadove, Chairman and CEO of Saks Incorporated. Sir, you may begin your conference.

Stephen I. Sadove

Thank you very much. Good morning, this is Steve Sadove and I’m joined on the call by Ron Frasch, our President and Chief Merchandising Officer; Kevin Wills, our CFO; and Julia Bentley, our Senior VP of IR. I’d like to thank each of you for taking the time to join us.

First, let me note that some of the comments on the call today as well as some of the information presented in our release related to future results or expectations are considered forward-looking information within the definition of the federal securities laws.

The forward-looking information is premised on many factors and actual consolidated results might differ materially from projected information if there any material changes in our assumptions or in the various risks related to our industry and our company. For a description of the risks and assumptions related to these projections, please refer to the release and our filings with the SEC, including our most recent Form 10-K.

Today, we’ll discuss the financial results for the third quarter and nine months ended October 31, 2009 and our outlook for the fourth quarter and update you on several other matters. At the end of the call, we’ll be glad to respond to your questions.

Before I turn the call over to Kevin to discuss the financial results, let me take a couple of minutes to give you my overall assessment of the quarter.

I continue to be very pleased with how the entire organization has aggressively responded to the challenging environment. Just as our customers have changed the way they shop, we have made changes in the way we are managing our business. We have made needed adjustments to our merchandising, service and marketing strategies and carefully managed our inventories, expenses, and capital spending.

In spite of our comparable store sales decline, we were able to post a modest third quarter profit. During the quarter, our controlled inventory levels and disciplined promotional and clearance cadence paid off, with a substantial improvement in our gross margin rate. And our continued focus on expense containment resulted in another meaningful reduction in year-over-year SG&A expenses.

We successfully executed a $100 million common stock offering during the quarter, which allowed us to eliminate outstanding borrowings on a revolving credit facility. The equity offering further strengthened our capital structure and has provided increased flexibility going forward.

The environment remains very challenging. Although business appears a bit more stable and predictable than it did 12 or even six months ago, I’m confident that luxury will rebound and that we have taken and continue to take the necessary steps for Saks to emerge a stronger company, when the economy returns to a more normalized state.