Saks Fifth Avenue 2008 Annual Report Download - page 5

For the year ended January 31, 2009, SFA’s percentages of owned sales (exclusive of sales generated by
leased departments) by major merchandise category were as follows:
Women’s Apparel .................................................... 35.5%
Accessories .......................................................... 20.2%
Cosmetics ........................................................... 15.9%
Men’s Apparel ....................................................... 14.6%
Women’s Shoes ...................................................... 9.6%
Other ............................................................... 4.2%
Total .......................................................... 100.0%
Inventory Purchasing and Distribution
Consistent with practices in the retail industry, the Company purchases merchandise assortments and
volumes to coincide with the seasonality of the business and expected customer demand. Retailers typically
purchase and receive larger amounts of merchandise in the fall as they prepare for the holiday shopping season
(primarily November and December).
The Company purchases merchandise from many vendors. Management monitors profitability and sales
history with most vendors and believes it has alternative sources available for each category of merchandise it
purchases. Management believes it maintains good relationships with its vendors.
The Company has two distribution facilities serving its stores. Refer to “Item 2. Properties” for additional
information about these facilities.
The Company’s distribution facilities operate on a modern warehouse management system that leverages
EDI (electronic data interchange) technology in conjunction with high-speed automated conveyor systems in
order to receive and distribute merchandise as economically as possible to the Company’s stores. Many of the
Company’s vendors also utilize EDI technology which permits merchandise to be ‘cross docked’ from the
receiving department to the shipping department, with very little handling. The distribution centers also use
efficient radio frequency hand-held devices to scan barcodes on merchandise that is too large or fragile for the
conveyor system. The warehouse management system is interfaced to the Company’s mainframe to execute
‘booking’ of the merchandise to the stores and to pass the appropriate records to accounting for invoice payment
and reconciliation.
Return Policy
The Company offers its customers a fair and liberal return policy, consistent with other luxury retailers, at
SFA stores, OFF 5th stores, and online at www.saks.com. Approximately 25% of merchandise sold is later
returned, and the vast majority of merchandise returns occur within a matter of days of the selling transaction.
The Company uses historical return patterns to estimate expected returns.
Information Technology
Company management believes that technological investments are necessary to support its business
strategies, and, as a result, the Company is continually upgrading its information systems to improve efficiency
and productivity. Between 2006 and 2008, the Company completed significant upgrades to its merchandising
planning and allocation systems and installed new point-of-sale equipment and software with enhanced
clienteling capabilities in each of its SFA stores.
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