Department stores surprise in the Q3

New York City The department store sector had a few surprises in store for the third quarter. Saks said Tuesday it eked out an unexpected profit for the quarter ended Oct. 31, recording net income of $1.9 million, up from a loss of $43.7 million a year earlier.

Trimmed expenses and scaled-back promotions and clearance merchandise were credited for the surprising swing.

Although same-store sales declined 10.1%, less discounting boosted profit margins.

Revenue fell 8.5% to $631.4 million from $690.3 million a year earlier. Wall Street forecast revenue of $625.6 million.

Little Rock, Ark.-based Dillard’s also sent Wall Street a surprise report, when it recorded a third-quarter profit of $8 million, compared with a loss of $56 million in the year-ago period. Sales in the quarter ended Oct. 31 fell to $1.36 billion from $1.51 billion. Analysts estimated sales of $1.31 billion.

Dillard’s CEO William Dillard, II said, “We continued to benefit from our improvements in inventory management, where we have focused on more conservative purchasing combined with efforts to better match the timing of receipts with demand. Accordingly, even with the substantial inventory decline at the end of the quarter [22%], we believe we are well-positioned to meet anticipated fourth-quarter holiday demand with a steady flow of compelling product receipts throughout the season.”

During the quarter, Dillard’s closed its Chesapeake Square location in Chesapeake, Va. Currently, Dillard's has identified four other locations for closure during 2009 and remains committed to closing under-performing stores where appropriate.

The retailer currently operates 302 Dillard's locations and 11 clearance centers spanning 29 states.