Saks Incorporated Announces Results for the Fourth Quarter and Fiscal Year Ended February 3, 2007

Business Wire, March 7, 2007

Company Posts Fourth Quarter Income from Continuing Operations of $21.6 Million vs. Loss of $29.9 Million Last Year

NEW YORK -- Retailer Saks Incorporated (NYSE: SKS) ("Saks" or the "Company") today announced results for the fourth quarter and fiscal year ended February 3, 2007.

The Company announced today in a separate release that comparable store sales increased 24.7 % for the four weeks ended March 3, 2007 compared to the four weeks ended February 25, 2006.

The Company sold its Saks Department Store Group ("SDSG") businesses in 2005 and 2006, and the sold SDSG businesses are presented as "discontinued operations" in the current and prior year periods. Saks Fifth Avenue ("SFA") and Club Libby Lu are reflected in the Company's continuing operations.

Overview of Fourth Quarter Results

Saks Incorporated recorded income from continuing operations of $21.6 million, or $.14 per share, for the fourth quarter ended February 3, 2007. Net income (after discontinued operations) totaled $21.5 million, or $.14 per share.

The fourth quarter included the following after-tax amounts:

* expenses of approximately $10.0 million, or $.07 per share, for retention and severance as the Company downsizes following the disposition of its SDSG businesses,

* an $8.2 million, or $.05 per share, non-cash charge related to the treatment under Financial Accounting Standard 123(r) ("FAS 123(r)") of the anti-dilutive adjustment made to outstanding options resulting from the Company's $4 per share dividend paid in the fourth quarter,

* net charges of $2.7 million, or $.02 per share, primarily related to a write down of assets held for disposition,

* expenses of approximately $1.4 million, or $.01 per share, for legal and other costs associated with the previously disclosed ongoing investigations by the Securities and Exchange Commission and the Office of the United States Attorney for the Southern District of New York,

* an insurance deductible adjustment (credit) of $1.0 million, or $.01 per share, related to the New Orleans store, and

* income of approximately $14.4 million, or $.09 per share, primarily due to the favorable conclusion of certain tax examinations and the adjustment of certain tax valuation allowances.

The current year period includes an extra week, creating a 14-week fiscal fourth quarter and a 53-week fiscal year that occurs every six years in the accounting cycle for the Company and many other retailers. Management estimates that the extra week added $.06 to earnings per share for the fourth quarter and the current year.

For the prior year fourth quarter ended January 28, 2006, the Company recorded a loss from continuing operations of $29.9 million, or $.22 per share. After recognition of the Company's after-tax gain from discontinued operations of $27.6 million, or $.20 per share, the net loss totaled $2.2 million, or $.02 per share, for the prior year fourth quarter. The prior year fourth quarter included net after-tax charges of:

* $7.5 million, or $.06 per share, primarily related to asset impairments and dispositions,

* expenses of approximately $5.9 million, or $.04 per share, for retention and severance, and

* expenses of approximately $1.7 million, or $.01 per share, for legal and other costs associated with the previously disclosed investigations.

Comments on the Quarter

Steve Sadove, Chief Executive Officer of the Company, noted, "We are pleased with the significant increase in operating income for the quarter which was driven by strong comparable store sales, substantial improvement in the gross margin rate, and solid expense management."

"Our fourth quarter comparable store sales increase of 9.9% and gross margin rate improvement of 430 basis points indicate that we have made much progress on understanding our core customer by market and on refining our merchandise assortments in each of our stores. Our sell-throughs of full-priced merchandise have improved significantly, and our customer service, clienteling, and marketing efforts continue to improve."

"I am most pleased with the commitment, excitement, and level of teamwork throughout our entire organization," Sadove also noted. "We are well on our way to a cultural transformation at Saks Fifth Avenue, and we have a clear and compelling vision of the future that the entire organization is embracing. We have streamlined and strengthened the organizational structure and created a more inclusive culture with a focus on collaboration. These changes are paying off."

Sadove continued, "Traffic, number of transactions, and average ticket trends all improved for the quarter, and nearly all merchandise categories and geographies performed very well during the period. We saw strong performance from our New York City flagship and most other flagship stores, as well as many of our stores in secondary trade areas where we have intensified our focus and substantially enhanced the merchandise assortments. The Saks Direct business posted a sales increase of nearly 40% over last year's fourth quarter, and we experienced improving trends at Off 5th."