Saks Fifth Avenue 2009 Annual Report Download - page 24

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Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management’s Discussion and Analysis (“MD&A”) is intended to provide an analytical view of the business from management’s perspective of operating
the business and is considered to have these major components:
• Overview
• Results of Operations
• Liquidity and Capital Resources
• Critical Accounting Policies
MD&A should be read in conjunction with the consolidated financial statements and related notes thereto contained elsewhere in this Form 10-K.
OVERVIEW
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 Club Libby Lu
(“CLL”), the operations of which were discontinued in January 2009. The operations of CLL 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 primarily 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 30, 2010, the Company operated 53 SFA stores with a total of approximately 5.9 million square feet and 55 OFF 5TH stores with a total
of approximately 1.6 million square feet.
The Company is primarily focused on the luxury retail sector. All of the goods that the Company sells are discretionary items. Consequently, a downturn
in the economy or difficult economic conditions may result in fewer customers shopping in the Company’s stores or online. In response, the Company may have
to increase the duration and/or frequency of promotional events and offer larger discounts in order to attract customers, which would reduce gross margin and
adversely affect results of operations.
The Company continues to make targeted investments in key areas to improve customer service and enhance merchandise assortment and allocation
effectiveness. In addition, strategic investments are being made to remodel existing selling space with a heightened focus on return on investment. The Company
believes that its long-term strategic plans can deliver additional operating margin expansion in future years.
The Company seeks to create value for its shareholders by improving returns on its invested capital. The Company attempts to generate improved
operating margins by generating sales increases while improving merchandising margins and controlling expenses. The Company uses operating cash flows to
reinvest in the business and to repurchase debt or equity. The Company actively manages its real estate portfolio by routinely evaluating opportunities to improve
or close underproductive stores and open new stores.
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Source: SAKS INC, 10-K, March 18, 2010 Powered by Morningstar® Document Research℠