Saks Fifth Avenue 2008 Annual Report Download - page 3

PART I
Item 1. Business.
General
The operations of Saks Incorporated, a Tennessee corporation first incorporated in 1919, and its subsidiaries
(together the “Company”) consist of Saks Fifth Avenue (“SFA”), Saks Fifth Avenue OFF 5TH (“OFF 5th”), and
SFA’s e-commerce operations. Previously, the Company also operated Saks Department Store Group (“SDSG”),
which consisted of Proffitt’s and McRae’s (“Proffitt’s”) (sold to Belk, Inc. (“Belk”) in July 2005), the Northern
Department Store Group (“NDSG”) (operated under the nameplates of Bergner’s, Boston Store, Carson Pirie
Scott, Herberger’s and Younkers and sold to The Bon-Ton Stores, Inc. (“Bon-Ton”) in March 2006), Parisian
(sold to Belk in October 2006), and Club Libby Lu (“CLL”) (the operations of which were discontinued in
January 2009). The sold businesses and discontinued operations are presented as discontinued operations in the
consolidated statements of income and the consolidated statements of cash flows for the current and prior year
periods and are discussed below in “Discontinued Operations.”
The Company is a fashion retail organization offering a wide assortment of distinctive luxury fashion
apparel, shoes, accessories, jewelry, cosmetics and gifts. SFA stores are principally free-standing stores in
exclusive shopping destinations or anchor stores in upscale regional malls. Customers may also purchase SFA
products by catalog or online at www.saks.com. OFF 5th is intended to be the premier luxury off-price retailer in
the United States. OFF 5th stores are primarily located in upscale mixed-use and off-price centers and offer
luxury apparel, shoes, and accessories, targeting the value-conscious customer. As of January 31, 2009, the
Company operated 53 SFA stores with a total of approximately 5.9 million square feet and 51 OFF 5th stores with
a total of approximately 1.4 million square feet.
Merchandising, sales promotion, and store operating support functions reside in New York, New York. The
back office sales support functions for the Company, such as accounting, credit card administration, store
planning, and information technology, principally are located in the Company’s operations center in Jackson,
Mississippi or in the SFA corporate offices in New York City.
The Company’s fiscal year ends on the Saturday closest to January 31. Fiscal years 2008 and 2007 each
contained 52 weeks and ended on January 31, 2009 and February 2, 2008, respectively. Fiscal year 2006
contained 53 weeks and ended on February 3, 2007.
Discontinued Operations
On July 5, 2005, Belk acquired from the Company for $622.7 million in cash substantially all of the assets
directly involved in the Company’s Proffitt’s business operations, plus the assumption of approximately $1
million in capitalized lease obligations and the assumption of certain other ordinary course liabilities associated
with the acquired assets. The assets sold included the real and personal property and inventory associated with 22
Proffitt’s stores and 25 McRae’s stores that generated fiscal 2004 revenues of approximately $784 million. The
Company realized a net gain of $155.5 million on the sale.
On March 6, 2006, the Company sold to Bon-Ton all outstanding equity interests of certain of the
Company’s subsidiaries that owned NDSG, either directly or indirectly. The consideration received consisted of
approximately $1.12 billion in cash (reduced as described below based on changes in working capital), plus the
assumption by Bon-Ton of approximately $35 million of unfunded benefit liabilities and approximately $35
million of capital leases. A working capital adjustment based on working capital as of the effective time of the
transaction reduced the amount of cash proceeds by approximately $75 million resulting in net cash proceeds to
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