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Smaller Saks Struggles for Sizzle

Birmingham, Ala. —Weighed down by weakness at its flagship Saks Fifth Avenue Stores, Saks Inc. recorded a fourth quarter loss of $2.2 million, compared with a year-before profit of $96.6 million. Operating profit at swank Saks Fifth Ave. was slashed by 86.9%, tumbling to $7.6 million from $58.0 million last year.

Tugging at the bottom line was $56.3 million in goodwill and other charges tied to the earlier sale of the retailer's Proffitt's and McRae's divisions as part of a broad sell-off of its department store holdings.

There was some good news. With the department store sell-off, sales dropped off by 14.2% during the all-important Christmas quarter, to $1.8 billion from $2.1 billion last year — but the crucial gauge of same-store sales climbed 1.9%. Department stores outpaced S5A in operating profit, down 4.0%, compared with the slide of almost 90% at Saks Fifth Ave.

The retailer said it plans to pay out a special $4 per share dividend after completing the sale of its northern department store group to Bon Ton Stores for $1.1 billion and a debt assumption of $85 million.

Saks Inc.

Qtr. 1/28 (x000) 2005 2004 % change
(loss)
a. Fourth quarter results include a $12.9 million asset impairment charge, compared with $2.8 million during the same period last year; a $51.5 million goodwill impairment charge; and a $355,000 loss on the early retirement of debt.
b. 12-month results include a $2.1 million asset impairment charge, compared with $12.1 million a year ago; a goodwill impairment charge of $51.5 million; a $29.4 million loss on the early retirement of debt. Prior-year results included a $156.3 million gain on the sale of stores.
Sales $1,772,823 $2,065,082 -14.2
Oper. income (EBIT) 238,448 315,950 -24.5
Net income (2,242)a 96,640a
Per share (diluted) (0.02) 0.71
Average gross margin 35.8% 36.8%
SG&A expenses 22.4% 21.5%
12 months
Sales 5,953,352 6,437,277 -7.5
Oper. income (EBIT) 662,146 827,159 -19.9
Net income 22,348b 61,085b -63.4
Per share (diluted) 0.16 0.42
Average gross margin 37.1% 37.9%
SG&A expenses 26.0% 25.1%


Fourth Quarter Segment Results

Sales – Qtr. 1/28 (x000) 2005 2004 % change
Saks Department Stores $970,777 $1,225,192 -20.8
Saks Fifth Avenue 802,046 839,890 -4.5
Operating Income – Qtr. 1/28 2005 2004 % change
Saks Department Stores 119,431 124,461 -4.0
Saks Fifth Avenue 7,591 58,037 -86.9


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