Saks Reports 2Q With Better Than Expected Results

Saks Incorporated SKS reported 2Q results that exceeded estimates by Citigroup, posting EPS of (-$0.13) over the (-$0.16) estimate, which is significantly better than (-$0.39) in 2Q2009. Saks's SSS increased +4.6% in its 2Q, and the EPS results reflected gross margins that improved +701bps y/y, consistent with Citigroup's forecast. SG&A leverage was worse than expected (-81bps vs. the -40bps estimate), and better than expected operating expenses (+193bps vs. the +95bps forecast). Citigroup maintains its 1H (high risk) Buy rating and $11 price target. Saks Incorporated closed yesterday at $7.81.