Saks Fifth Avenue 2010 Annual Report Download - page 4

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For the year ended January 29, 2011, the Company’s percentages of owned sales (exclusive of sales
generated by leased departments) by major merchandise category were as follows:
Women's Apparel ..................................................... 37.5%
Accessories .......................................................... 18.9%
Cosmetics ........................................................... 12.1%
Men's Apparel ....................................................... 15.2%
Women's Shoes ...................................................... 12.8%
Other ............................................................... 3.5%
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 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
electronic data interchange (“EDI”) 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.
In 2010, the Company installed an advanced robotics system for receiving and fulfilling Saks Direct orders
in its primary distribution facility located in Aberdeen, Maryland. The automation provided by the robotics
system has significantly increased productivity, improved space utilization, and improved customer service.
Approximately 40% of Saks Direct’s orders were being fulfilled on the new system by the end of 2010; the
system is expected to be fully operational by mid-2011.
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 saks.com. Approximately 22% of merchandise sold is later returned,
and a large percentage 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
operations and strategies, and, as a result, the Company is continually upgrading its information systems to
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