Saks Fifth Avenue 2008 Annual Report Download - page 4

the Company of approximately $1.04 billion. The disposition included NDSG’s operations consisting of, among
other things, the following: the real and personal property, operating leases and inventory associated with 142
NDSG units (31 Carson Pirie Scott stores, 14 Bergner’s stores, 10 Boston Store stores, 40 Herberger’s stores, and
47 Younkers stores), the administrative/headquarters facilities in Milwaukee, Wisconsin, and distribution centers
located in Rockford, Illinois, Naperville, Illinois, Green Bay, Wisconsin, and Ankeny, Iowa. NDSG generated
fiscal 2005 revenues of approximately $2.2 billion. The Company realized a net gain of $204.7 million on the
sale.
On October 2, 2006, the Company sold to Belk all of the outstanding equity interests of the Company’s
subsidiaries that conducted the Parisian specialty department store business (“Parisian”). The consideration
received consisted of $285.0 million in cash (increased in accordance with a working capital adjustment
described below). In addition, Belk reimbursed the Company at closing for $6.7 million in capital expenditures
incurred in connection with the construction of four new Parisian stores. Belk also paid the Company a premium
associated with the purchase of accounts and accounts receivable from Household Bank (SB), N.A. (now known
as HSBC Bank Nevada, N.A., “HSBC”), in the amount of $2.3 million. A working capital adjustment based on
working capital as of the effective time of the transaction increased the amount of cash proceeds by $14.2 million
resulting in net cash proceeds of $308.2 million. The disposition included Parisian’s operations consisting of,
among other things, the following: real and personal property, operating leases and inventory associated with 38
Parisian stores (which generated fiscal 2005 revenues of approximately $740 million), an administrative/
headquarters facility in Birmingham, Alabama and a distribution center located in Steele, Alabama. The
Company realized a net loss of $12.8 million on the sale.
As of January 31, 2009, the Company discontinued the operations of its CLL business, which consisted of
98 leased, mall-based specialty stores, targeting girls aged 4-12 years old. CLL generated revenues of
approximately $52.2 million for 2008 and was not profitable. The Company incurred charges of $44.5 million in
2008 associated with closing the stores. The Company expects to incur nominal charges relating to CLL in 2009.
Merchandising
SFA stores carry luxury merchandise from both core vendors and new and emerging designers. SFA has key
relationships with the leading American and European fashion houses, including Giorgio Armani, Chanel, Gucci,
Prada, Louis Vuitton, St. John, Zegna, Theory, Juicy Couture, David Yurman, Hugo Boss, Elie Tahari, Tory
Burch, Ralph Lauren, Akris and Burberry, among many others.
The Company has developed a knowledge of each of its trade areas and customer bases for its SFA and OFF
5th stores. This knowledge is gained through use of on-line merchandise information, store visits by senior
management and merchandising personnel, and frequent communication between merchandising staff and store
management. The Company strives to tailor each store’s merchandise assortment to the characteristics of its trade
areas and customer bases and to the lifestyle needs of its local customers.
Certain departments in the Company’s SFA stores are leased to independent companies in order to provide
high quality service and merchandise where specialization and expertise are critical. The leased departments are
designed to complement the Company’s owned merchandising departments. The principal leased departments in
the SFA stores are furs and certain designer handbags. The terms of the lease agreements typically are between
one and seven years and may require the lessee to pay for a portion of the fixtures and provide its own
employees. Management regularly evaluates the performance of the leased departments and requires compliance
with established customer service guidelines.
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