Saks Incorporated Announces Results for the Third Quarter Ended November 1, 2008

Business Wire, Nov 18, 2008

NEW YORK -- Retailer Saks Incorporated (NYSE: SKS) ("Saks" or the "Company") today announced results for the third quarter and nine months ended November 1, 2008.

Overview of Results for the Third Quarter and Nine Months

Saks recorded a net loss of $42.8 million, or $.31 per share, for the third quarter ended November 1, 2008. The third quarter included the following after-tax items totaling $24.5 million, or $0.18 per share:

* expenses of $10.6 million related to asset impairments (primarily related to discontinuation of the Club Libby Lu operations),

* a gain of $0.7 million related to the sale of a vacant real estate parcel, and

* the write-off and adjustment of $14.6 million of certain deferred tax assets primarily associated with Federal Net Operating Loss tax credits that are subject to expiration at the end of fiscal 2008.

For the prior year third quarter ended November 3, 2007, the Company recorded net income of $21.6 million, or $.14 per share. The prior year third quarter included the following after-tax items totaling $4.3 million, or $.03 per share:

* expenses of approximately $0.5 million for retention, severance, and transition costs related to the Company's downsizing and consolidation following the disposition of its Saks Department Store Group ("SDSG") businesses,

* $0.3 million related to asset impairments and dispositions,

* expenses of approximately $0.8 million due to an increase in income tax reserves related to certain tax examinations, and

* expenses of approximately $2.7 million associated with the previously disclosed investigations and settlements.

For the nine months ended November 1, 2008, Saks recorded a net loss of $56.2 million, or $.41 per share. The nine months included the following after-tax items totaling $25.5 million, or $0.18 per share:

* expenses of $11.4 million related to asset impairments (approximately $10.6 million of which were related to discontinuation of the Club Libby Lu operations with the majority of the balance related to the Saks Fifth Avenue Ft. Lauderdale store closing),

* expenses of approximately $0.2 million for severance costs related to the Ft. Lauderdale store closing,

* a gain of $0.7 million related to the sale of a vacant real estate parcel, and

* the write-off and adjustment of $14.6 million of certain deferred tax assets previously mentioned.

For the prior year nine months ended November 3, 2007, the Company recorded net income of $8.0 million, or $.05 per share. The prior year nine months included the following after-tax items totaling $26.6 million, or $.17 per share:

* expenses of approximately $16.2 million for retention, severance, and transition costs,

* a loss on extinguishment of debt totaling $3.4 million related to the repurchase of $106.3 million of senior notes,

* $2.5 million related to asset impairments and dispositions,

* expenses of approximately $0.8 million due to an increase in income tax reserves related to certain tax examinations, and

* expenses of approximately $3.7 million associated with the previously disclosed investigations and settlements.

Comments on the Third Quarter and Nine Months Ended November 1, 2008

Stephen I. Sadove, Chairman and Chief Executive Officer of the Company, noted, "Our sales results and operating performance in the third quarter were well below our initial expectations, reflecting rapidly deteriorating macroeconomic conditions throughout the period."

The Company's comparable store sales declined 5.9%, 10.9%, and 16.6% in August, September, and October, respectively, culminating in an 11.5% decline for the quarter. This compares to the 11.4% comparable store sales gain reported in last year's third quarter.

Sadove commented, "During the quarter, the Company experienced progressive softening across all geographies, merchandise categories, and channels of distribution. In previous quarters, comparable store sales performance of the New York City flagship store, which comprises approximately 20% of our total Company revenues, meaningfully outperformed the balance of the store base. We saw this trend change in the third quarter, with the New York store sales performance only slightly better than the Company average. October was a more difficult month for this location as the financial markets worsened, news of bank failures and additional lay-offs took hold, and tourism slowed. Certain of the Company's newly-renovated stores outside of New York City, however, continued to post better than the chain-wide average results.

"During the quarter, the Company continued to experience widespread weakness in women's apparel and softness in areas such as women's shoes and handbags that had delivered explosive growth during 2007. Some of the relatively better-performing merchandise categories for Saks Fifth Avenue during this quarter included cosmetics, fragrances, jewelry, men's contemporary sportswear, and men's shoes."

While Saks Direct was a relative bright spot, posting a comparable store sales gain of approximately 10% for the quarter on top of last year's nearly 40% third quarter growth, sales growth in this business slowed significantly from prior quarters. Likewise, although Saks Fifth Avenue OFF 5TH's ("OFF 5TH") comparable store sales performance was better than the Company's average for the period, business trends were significantly below prior quarters.