Saks loss wider, sees weakness in rest of year

By Aarthi Sivaraman

NEW YORK (Reuters) - Upscale retailer Saks Inc. posted a wider-than-expected quarterly loss on Tuesday, as even its well-to-do shoppers curbed spending as the economy weakens, and forecast a drop in its 2008 operating margin.

The company forecast same-store sales, a key metric of retail health, to be flat or down in the low-single-digit rate in the second half of the year -- a period that includes the critical holiday shopping season, when most retailers usually hope for good fortunes.

"We know we are continuing to face the headwinds of the economic and retail environment. Consequently, we are approaching the near term conservatively and believe our 2008 operating margin (excluding certain items) will decline from 2007 levels," Chief Executive Stephen Sadove said in a statement.

Saks' caution is a fresh indicator that spending worries have spilled over into the luxury sector, where shoppers are normally expected to be more resistant to higher costs for necessities like food and fuel, or the housing downturn.

Net loss at the New York-based retailer was $31.7 million or 23 cents per share, compared to a net loss of $24.6 million or a loss of 17 cents per share.

Excluding some asset impairment and severance costs, Saks lost 22 cents per share, while analysts, on average, expected a loss of 19 cents per share, according to Reuters Estimates.

The operator of Saks Fifth Avenue stores said quarterly sales fell to $669.2 million, from $694.1 million a year ago.

Saks previously reported July sales fell 5.3 percent at stores open a year.

"During the quarter, we experienced a softening across nearly all geographies and merchandise categories," Sadove said.

Sales at stores open at least a year would have been slightly positive, excluding the effect of a spring season sale, which it moved into the first quarter of this year from the second quarter a year ago, Sadove added.

(Editing by Dave Zimmerman)